EUR/CHF is rising due to expectations that the Swiss National Bank (SNB) may step into the currency markets. However, delays in EU–US trade talks ahead of an August tariff deadline are causing uncertainty, which limits the pair’s gains. The Euro is climbing against the Swiss Franc, currently above 0.9330, fueled by speculation about SNB intervention. Deposits at the SNB have soared, suggesting possible easing measures, although the SNB has not confirmed these rumors.

Potential SNB Action

A weaker Franc could reduce deflation and help Switzerland’s export sector, making any potential SNB action significant. At the same time, escalating EU–US trade tensions, with tariffs approaching, are increasing market anxiety. Trade between the EU and US reached $1.96 trillion in 2024. The US plans to impose tariffs of 15%-20% on EU imports. This ongoing situation leads to cautious expectations from the European Central Bank. Technically, EUR/CHF is currently in a downward trend and is testing important Fibonacci resistance levels. If it moves above the 0.9336 to 0.9358 range, it might encourage a bullish trend toward 0.9400, with the Relative Strength Index indicating increasing momentum.

Trader Considerations

We suggest that derivative traders use the current tensions to position for a potential rise while managing risks carefully. The conflicting signals from monetary policy and trade uncertainties create a great setting for options strategies. Traders might consider buying call options to benefit from a possible rally triggered by central bank actions. Recent data shows that sight deposits at the SNB increased by CHF 1.4 billion to CHF 495.1 billion in the week ending June 7, 2024. This rise in deposits has historically signaled weakening of the Franc, indicating a loosening of monetary conditions. This scenario makes a policy shift to combat deflation a strong possibility and could lead to an appreciation of the pair. However, the trade tensions are serious and should not be overlooked. Trade in goods and services between these two major economies was over $1.5 trillion in 2023, and the ongoing dispute over steel and aluminum tariffs adds to the challenges. This persistent protectionist threat encourages a cautious stance from the European Central Bank, which could limit the Euro’s strength. Traders should consider the market’s reaction back in January 2015 when the currency floor was suddenly removed, causing massive volatility. This history shows how deeply policy decisions can affect this currency pair, meaning even unconfirmed reports warrant attention. The risk of sudden movements suggests that holding long positions could be too risky. Given the important technical resistance ahead, we believe a bull call spread is a smart strategy. This approach allows a trader to profit from a potential rise toward the 0.9400 level while capping maximum loss if trade challenges arise. It balances the upside potential of a policy-driven rally against the genuine downside risks from geopolitical factors. Create your live VT Markets account and start trading now.

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