EURCHF's Range Looks for Fundamental Stability Amid Turbulent Volatility

The demand for yield has once again soared and the currency market has responded in kind. Rallies from high-yielding currencies and plunges from those sporting a low benchmark have sent most of the market to short-term breakouts and back into short-term trends. However, this shift is far from confirmation of a new direction for FX and the other asset classes. We have seen many swings in the recent past that have promised action but ultimately faltered with time. This makes for frustrating trading as setups for both ranges and trends ultimately fall to the directionless volatility and immediate reversals. These are not the conditions to develop normal range-based strategies. To improve our chances, or very solid technical developments. There are few opportunities that meet any of these three scenarios; but EURCHF at least fulfills the fundamental requirement. While all currencies fit somewhere on the market’s tacit risk spectrum, some pairs are buffered to the rising and falling of sentiment by deep economic ties. The close dependence of the Swiss economy on the broader Euro Zone (as well as the more or less coordinated policy efforts) establishes a semi-permanent state of congestion for the pair. There are certainly biases that develop within this chop and sharp responses to unforeseen SNB intervention; but there are is a general pattern to follow. Our setup looks to take advantage of the range low that has developed over the past two weeks with an aggressive entry and a tight stop that this pair can easily support. The long bias is purposefully aligned to potential intervention; but even if the central bank doesn’t act, the first target is still within reach. We will cancel open orders in a week.