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4 Jun 2013
Flash: Investors have little reason to long EUR/CHF on technical basis – UBS
FXstreet.com (Barcelona) - The bulk of the short EUR/CHF positions amongst private clients were accumulated in H1 2012 amid heavy SNB activity.
However, “the OMT may have stopped the bleeding but there has been no attempt to play the upside - until last week. Of course, it is dangerous to over-interpret one week's worth of data, and Monday's sharp declines to below 1.24 may have hindered enthusiasm.” warns Gareth Berry, a Research Analyst at UBS. Also, not 100% of the liquidated francs will head into the Eurozone, so longs will need patience.
Implied yield differentials have moved against the franc of late vs. GBP and USD, but not in the EUR/CHF. Spreads are also nowhere near the levels seen in Q3 2011 amid active liquidity injections before the FX floor was put in place. Furthermore, on a volatility-adjusted basis the EUR/CHF is still lagging despite a broad-based collapse in carry-to-volume ratios. “In short, private clients have no reason to be long the cross on a technical basis, but it's all about expectations.” Berry notes.
However, “the OMT may have stopped the bleeding but there has been no attempt to play the upside - until last week. Of course, it is dangerous to over-interpret one week's worth of data, and Monday's sharp declines to below 1.24 may have hindered enthusiasm.” warns Gareth Berry, a Research Analyst at UBS. Also, not 100% of the liquidated francs will head into the Eurozone, so longs will need patience.
Implied yield differentials have moved against the franc of late vs. GBP and USD, but not in the EUR/CHF. Spreads are also nowhere near the levels seen in Q3 2011 amid active liquidity injections before the FX floor was put in place. Furthermore, on a volatility-adjusted basis the EUR/CHF is still lagging despite a broad-based collapse in carry-to-volume ratios. “In short, private clients have no reason to be long the cross on a technical basis, but it's all about expectations.” Berry notes.