Hi, in the short video below I explained why you should not trade the Euro/Chf (under any circumstances) especially now and a few trading ideas.
I explain why longing it is very dangerous and you could lose all of your account.
BUT for those who want to be smart and short it, if it does what it did in 2015, you won’t get paid out anyway! So its a lose, lose, explained in the video.
Back in 2015 the Swiss National Bank (SNB) was intervening to stop the Euro getting weaker against the Franc. As a result, a lot of traders were risking a lot of money on small moves in the currency pair as it was almost a sure-fire bet. Every time the Euro looked like falling below 1.2000 traders bought it and sold it at the 55ema:
On the Monday of that week, the head of the SNB, Jordan said they had no intention of removing the “peg,” 2 days later they did and this happened:
You might think that if you were lucky enough to be short that you had just made a fortune, unfortunately, that was not the case. The brokers were not able to pay out on the shorts. A number of brokers went bankrupt, including Alpari Uk. FXCM needed a $300 million capital injection to survive and many individual traders lost their entire account and more.
You can see the immediate aftershock of the event in this ForexFactory forum post, including a guy who claimed to have lost $142.000 in that 30-minute spell 🙁 – remember, when trading forex there is the risk that you can lose MORE than the money in your account!
So Why do say that:
Why You Should NOT Trade the Euro/Chf
So if all of the above does not scare you off this pair at any time ( I have not touched it since 2015) why do I say now that You Should NOT Trade the Euro/Chf
In recent weeks the pair has been trading around 1.0500. Once again the SNB does not want it to fall any further, so they have been intervening, see this chart. Forex traders will be tempted to buy at 1.0500 as they may feel safe in the knowledge that the SNB will intervene. You have been warned!
Why does the Swiss National Bank Intervene?
The Swiss National Bank routinely intervenes in the forex markets to weaken their currency as it affects their export market. They are particularly active versus the Euro. What it means is that they use billions of their own currency to buy the Euro to try and stop the latter getting any weaker.
Switzerland is often seen as a safe haven for money in times of trouble. Even though their current interest rate is -0.75% – yes you read that right. If you put money in a Swiss bank they will charge you to look after it! The negative interest rate still hasn’t put folks off holding their money in Swiss Francs, so the central bank intervenes to weaken it further.
Nor do they deny it. Recently Trump criticised them for being a currency manipulator. The SNB made some comments that they were not, but its an open secret and last week they admitted it was “intervening more strongly in the foreign exchange market to contribute to the stabilization of the situation”.
The rise in sight deposits showed the SNB was clearly increasing its activity, said Alessandro Bee, an economist at UBS. “This is the strongest weekly rise since mid-2016, after the Brexit vote, and is a clear sign of intervention,” Bee said.
Here are a couple of articles explaining how the Swiss National Bank is intervening in the forex markets to weaken their currency. They do NOT want your money. They have negative interest rates to discourage people and yet folks still prefer the Chf above other currencies as a safe haven:
Here is the video where I explained more on the subject as well as some trading ideas:
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