Removing the 'CHF peg' was the right decision! Is it?
These are the words from the SNB’s Jordan after they removed the 1.20 eur/chf peg, when Swiss franc causes panic on global markets. But, 15 days latter he is not that conviced in that decision. Talking on the SRF yesterday, head of the SNB Thomas Jordan said, that they are ‘observing’ the exchange rate situation, but he mentioned for several times that the Swiss franc remains overvalued at the current rate at 1.0500 vs euro. He is concerned about economy that’s for sure, he said, its possible we could have one or two quarters of negative quarterly growth. He also have said that, the bank is prepared to intervene in foreign exchange markets if necessary, but we do not speak about our transactions.
On my oppinion. If we take a look at the EUR/CHF development on the market, we could assume that they are already active. But, based on this talk, are they prepared again for new peg action? Is it possible to see a new firework on the market and is the 1.1000 EUR/CHF level the next possible target for SNB? Let’s see in the coming days!
From a technical prospective, it was a classic descending triangle. However they reiterated time and time again that keeping the peg was important and gave not the slightest hint it might be removed. The thing about trading technicals is that they don’t work very well when you have clowns out there manipulating the market. Anyway since I was slipped 200 pips when the peg was introduced I have left the Swissie well alone. Until they promise to stop manipulating the market, really the Swissie should be left alone. However having said that which Central Bank does not manipulate the market one way or another.
There was more then a hint that peg will be broken or removed. I wrote about this here at my blog, at December 16., a way before the peg was removed.