EUR/CHF might collapse
Sept 6 (Reuters) -If the Swiss national Bank continues to unwind its massive holdings of foreign currencies then EUR/CHF might collapse.
Without intervention to support the pair, which is not possible if Swiss reserves are to be further reduced, then there is a strong chance that EUR/CHF - which is entrenched in a downtrend that has endured since the global financial crisis in 2008 - drops further.
The cross has reached a critical point beyond which any drop should see EUR/CHF retest the all-time low at 0.8500 and there has been a recent sell signal when 55-DMA fell below the 200-DMA - Death Cross.
The critical point for EUR/CHF at 0.9250 was tested in December 2023 and this August and the SNB opted to support the pair both times.
If reserves are to be reduced this cannot continue, and with over 300 billion of foreign currencies sold in a short period since November 2021, it seems that Switzerland wants rid of its enormous stockpile of foreign cash.
Without official support EUR/CHF could drop toward the next major target for the trend at 0.7841.
Risk aversion stemming from China could stoke demand for the franc.
For more click on FXBUZ
EURCHF https://tmsnrt.rs/3yVYUjy
EURCHF critical level https://tmsnrt.rs/4cVqafT
EURCHF Death Cross sell signal https://tmsnrt.rs/3Tk12Zg
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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