EUR/CHF capped by politics

On the Monday after the Greek referendum was announced, the SNB's Chairman Jordan said the Eurozone is more robust than it was a few years ago and that he doesn't think Greece will destabilize others in the union though went on to say if a country left the Euro, one would have to ask questions about the union. EUR/CHF was much better behaved on that day.

It was just enough to prevent EUR/CHF from a rapid test of parity (low 1.0310) and as the day wore on and markets digested news of the Greek referendum, the tightening in EGB spreads coupled with the recovery in other markets, allowed EUR/CHF to grind back up.

The threat of SNB intervention may be enough to avoid a test of parity as long as a Greek EUR exit is avoided. But the ongoing uncertainty surrounding Greece, particularly over the next month, will act as a cap on any EUR/CHF rallies.

The technical outlook for USD/CHF is bullish near-term with the confluence of resistance between 0.9529 (200dma) and 0.9545 (May 15 high). Rallies over the coming quarter should struggle at 0.9866. On the downside, initial support is the 50dma at 0.9333, says RBC capital markets.