The euro has fallen against the Swiss franc on Wednesday, as traders woke up in the US to the news that the Treasury Department is adding more liquidity to the markets via long-term bonds.
EUR/CHF
The euro has plummeted against the Swiss franc during trading on Wednesday as the market is trying to digest the idea that the Treasury Department in the United States is issuing double its normal liquidity into the long end of the curve over the next month, suggesting a little bit of quantitative easing. And while that doesn't directly target either the euro or the Swiss franc, it has a major influence on psychology, and it's possible that traders are seeing this as a sign that things are getting worse. And if they are in fact getting worse, it's also possible that traders may see this as a concerning situation with risk appetite, maybe having traders run back to the Swiss franc for safety.
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These things remain to be seen, but it is worth noting that it is still, at this point at least, a positive carry trade, and certain traders will be attracted to that alone. Ultimately, this is a market that had been a little extended anyway, so a pullback was probably necessary, and we finally got the reason for people to step away from this position.
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That doesn't mean that it changes long-term, and quite frankly, I'd be surprised if it did, but it does mean that there is a real potential for some type of buying on the dip opportunity going forward.
Ultimately, this is a market that I do like longer-term. I believe it is probably only a matter of time before we get an opportunity to find cheap euros. I would be watching the technically important 0.93 level, which had previously been significant resistance and is now attracting the attention of the 50-day EMA.
The size of the candle is somewhat scary, but really, at this point in time, it still hasn't changed the trend, and we still have some time to go before the day is over.
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