Swiss franc leaps as euro sinks on Ukraine war risk rotation. Will EUR/CHF go lower?

[ArvinIG]

The Swiss franc continues to gain against euro as markets recalibrate; commodities and associated currencies continue to gain amongst the mayhem and with the risk profile of assets under scrutiny, will EUR/CHF break lower?

Source: Bloomberg

 

EUR/CHF Euro Swiss franc Russia United States Forex

 

The Swiss Franc is making fresh 6.5 highs against the Euro as the Russian attack on Ukraine continues to unfold. The Swissie has maintained it’s safe haven status despite joining the coalition of countries that will confiscate Russian assets.

There is a growing perception that Russia will extract some revenge on the EU through gas supplies.

The EU, US and their allies are looking to block Russia’s foreign exchange reserves, meaning that it would be difficult to defend the Ruble and increase the difficulties to fund themselves. The Bank of Russia raised rates to 20% in an effort to defend their currency.

The S&P 500 and the Dow finished their cash session only mildly softer while the Nasdaq had a small gain after all indices were deep in the red earlier in their day. Futures are pointing to a flat start to their day at the moment.

APAC equities had a mostly positive day with only Hong Kong’s Hang Seng index slightly softer. Japan’s Nikkei 225 index was the notable outperformer, up over 1.4% at one stage.

US Treasuries were slightly softer with yields steadying and inching up a few basis points. The 2-year note is back near 1.45%, after yesterday low yield of 1.41%.

Hong Kong might be about to go into lockdown as the Covid-19 situation is deteriorating there. Reports are emerging that contact tracing is no longer updating, hospitals are stretched to capacity and that morgues are almost full.

This could have wider implications for broader China and if the communist party maintains a zero policy to the pandemic.

The PBOC set the Yuan reference rate weaker than expected today despite a slightly better than expected manufacturing PMI coming in at 50.2.

The Chicago Board of Trade wheat futures contract traded a 10-year high overnight and remains at lofty levels. Wheat, soybeans and corn are all being sort after as supply from Ukraine and Russia evaporates.

Crude oil remains at elevated levels with the many Black Sea shipping routes closing, adding to supply woes for commodities generally. The WTI futures contract is trading above US$ 96.50 bbl.

The US and its allies are considering releasing 60 million barrels from strategic reserves.

Bitcoin jumped on the possibility of the crypto currency gaining favour amongst the turmoil. The spot price is above US$ 43,200 at the time of going to print.

Looking ahead, a series of European PMIs and CPI figures are due out and Canadian GDP will be released as well as the US ISM figures.

EUR/CHF technical analysis

EUR/CHF is trading at its lowest level since June 2015. Volatility has increased as observed by the widening of the 21-day simple moving average (SMA) based Bollinger Bands.

A close back inside the bands could signal a reversal, but another close outside the bands might signal the beginning of a new trend.

Nearby, yesterday’s low of 1.02761 may provide support while the pivot points of 1.03001 and 1.03266 could offer resistance.

Source: TradingView

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Daniel McCarthy | Strategist
01 March 2022