UBS reports that they went long EUR/CHF overnight at CHF1.2155, targeting a move up to 1.2500, with a stop at CHF1.1990. The reasons given for the positioning are that on Sep6, 2011, the SNB imposed a floor under EUR/CHF at CHF1.20 and pledged to buy ‘unlimited quantities’ of foreign currency to enforce it. Four months of success has boosted the credibility of the floor, and UBS doubt the CHF1.20 level will be allowed to give way. UBS also note that on Friday, December CPI is due, and a weak print is likely to reinforce market opinion that the SNB could eventually raise the currency floor, both to ward off deflationary pressures and to boost Swiss economic activity. UBS added that their Switzerland economist is below consensus and expects CPI to drop to -0.7% y/y (cons. -0.6%). Thin trading conditions over the holiday period have allowed the cross to settle back down to levels last seen almost two months ago, presenting an attractive opportunity to get long for a gradual push higher over the weeks ahead. Rate currently trades around CHF1.2180, Asia range CHF1.2151/95
EasyForexNews Research Team