USD/CHF – A test of the All-time low may be on the horizon

In reaction to the devastating earth quake and subsequent tsunami late last week, the Japanese central bank accelerated their interest rate announcement to Monday morning, deciding to release ¥15trillion into the market and double the size of the asset purchasing plan to ¥10trillion. Initially this decision helped weaken the yen from 80.60 to 82.40 within a matter of hours, however the reaction since has been rather subdued. We believe substantial yen appreciation due to a flight-to-safety is likely to be met with increased BoJ/MoF rhetoric and should USD/JPY fall below the key 80 level, ultimately direct market intervention.

Therefore, we believe a superior currency alternative during a flight-to-safety is the Swiss Franc. While the SNB would prefer to see limited CHF gains, they have utterly failed in their attempts to halt its appreciation over the last few years. Moreover, their efforts have cost Switzerland billions in losses, thereby crushing the political will to continue to support such a strategy going forward. From a technical perspective, USD/CHF failed up against prior trendline support turned resistance at 0.9365/70 and today appears to have broken below possible bear flag support around 0.9270/80. Importantly, a similar pattern has been seen with RSI, thus adding further significance to these recent price movements. The only level standing in the way of further CHF gains is the March 2nd All-time low just above the 0.92 figure.

Source: FOREX.com

15.03.2011