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EUR/CHF unlikely to breach 1.20 - Nomura

FXStreet (Bali) - According to Nomura FX Strategists, EUR/CHF is unlikely to breach 1.20 thanks to possible SNB's policy responses, thus concluding that the downside risk of EUR/CHF from this level is small.

Key Quotes

"EUR/CHF continues to perform poorly as yields have stayed low globally. The SNB's policy response to the latest ECB's decision will depend on how EUR/CHF trades into the next meeting on 18 September, but we expect the SNB to be more dovish and lower its inflation forecast further."

"The likelihood of policy action, the introduction of a negative interest rate and the next round of FX intervention are also rising. We do not expect EUR/CHF to breach 1.20 thanks to the SNB's policy responses, and the downside risk of EUR/CHF from this level is small, in our view."

"Historically, traditional reserve currencies, such as USD and JPY, tend to perform well when there is SNB intervention in the FX market. We currently recommend having CHF short exposure against USD in our USD long basket, and USD/CHF long positions into the two central bank meetings in the next two weeks (FOMC meeting on 17 September and SNB meeting on 18 September) look attractive."

"We are currently flat for EURcrosses, after booking profits from the EUR short basket to concentrate in EUR/USD short trades, but further increases in market expectations of an SNB intervention may have negative implications for NOK against other European currencies. AUD/NZD may also benefit from increased expectations of an SNB intervention."

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