EURCHF Range Trade Eyes 125 Points in Profits

The EURCHF has shown early signs of reversal from recently violent declines, offering an opportunity to buy the high-flying currency on a dip. Given overall market volatility, however, we shall have to allow for relatively wide stop loss orders so as not to be shaken out ahead of a swift reversal.


[B]Trading Tip - The EURCHF has shown early signs of reversal from recently violent declines, offering an opportunity to buy the high-flying currency on a dip. Given overall market volatility, however, we shall have to allow for relatively wide stop loss orders so as not to be shaken out ahead of a swift reversal. Quiet event risk in both economies should mean similarly uneventful trade, but a continued global equity market sell-off threatens to force further Swissie appreciation. Absent such a risk, the trader would stand to make a minimum of 125 points on a successful EURCHF range trade, with full extension eyeing a run up to all-time highs. If the trade is profitable ahead of the coming week?s Swiss Consumer Price Index report, the range trader may decide to scale back EURCHF longs in anticipation of post-event volatility.[/B]

[B]Event Risk Euro-zone and Switzerland[/B]
[B]Euro-zone[/B] - A relatively empty economic calendar should keep the Euro contained through the coming week, with the sole exception of a European Central Bank meeting to potentially force large moves in the currency. The upcoming ECB announcement and communiqué will likely carry less weight than most, however, as it is the usual summer teleconference and is highly unlikely to call for changes in interest rates. Nor does ECB President Jean Claude Trichet field questions following the bank?s official statement, giving speculators little to gauge the likelihood of a pending interest rate hike. Outside of a surprise in the ECB announcement, foreseeable volatility is limited for the single currency.
[B]Switzerland [/B]- Event risk in Switzerland is largely tame until an end-of-week Consumer Price Index report. Such a quiet calendar should leave the Swissie in relatively stable territory absent a continuation of recent carry trade liquidation. Traders still in a range trade position may look to limit CHF exposure ahead of the report, however, as any large surprises could easily drive extended moves in the European currency pair. Otherwise, foreseeable event risk is relatively limited for the small landlocked nation.

[B] Data for July 30 - August 3 Data for July 30 - August 3
Date Euro-zone Economic Data Date Switzerland Economic Data[/B]
Jul 31 German Unemployment Change (JUL) Jul 31 UBS Consumption Indicator (JUN)
Aug 2 ECB Rate Decision Aug 2 SVME Purchasing Managers Index (JUL)
Aug 3 Euro Zone Retail Sales (JUN) Aug 3 Consumer Price Index (JUL)