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Christopher Lewis
eurchfWEEK

The EUR/CHF pair initially broke above significant resistance during the course of the week, but it turned back around to form a shooting star. Nonetheless, we believe that there is quite a bit of bullish pressure underneath and down to the Swiss National Bank will continue to work against the value of the Swiss franc, especially in this market. With that being said, we believe that volatility is probably going to be the way going forward but also recognize that a break above the top of the shooting star would be a bullish sign that would have the market go much higher. We believe ultimately that this market should then go to the 1.20 level, which is where the Swiss National Bank recently had a currency peg to the Euro.

At this point in time, it could be very volatile on the way up, but every time this market pulls back you have to think that the marketplace will favor buying this market. Ultimately, we don’t have any real interest in selling because we see the entire area between 1.08 and 1.06 as being massively supportive. With that in mind, this is essentially a “buy only” market, but we do recognize that you may want to build your position up gradually. Starting out was small positions and adding to them as we go long. There is enough volatility but quite frankly if you jump “all in” right away, we could have quite a bit of backlash that could cause quite a bit of problems. Remember, sometimes it is a necessarily the position you have but the leverage that causes so many problems.

Although the shape of the candle is somewhat negative, the truth of the matter is that there are a lot of external forces at play in this particular currency pair. Ultimately, you have to think of this more or less as an investment, as the swap is positive to the upside as well. Ultimately, if you can hang onto a bit of volatility, you should be well rewarded by being bullish of this market.

 

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