FxWirePro: Euro zone macros hamper EUR/CHF’s healthy bull run – technicals signal still a buy

We would view that as a buying opportunity for EUR/CHF. On a 1-3m horizon, our target is still higher though we have adjusted our Q4 forecast (now 1.10, prev 1.12). The latest quarterly SNB meeting did nothing to fundamentally change the outlook. The inflation forecast was revised lower again in the near-term (on lower energy prices) though the long-term forecast was little changed.

But yesterday, many macro numbers in euro zone such as service PMI for Italy, Spain and Germany have reported sluggish numbers followed by U.K's service PMI were very disappointing that have missed their estimates. Today, German factors orders have fallen to -1.8% which has again missed forecasts at 0.5%.

On the flip side Swiss major concern of inflation has also remained well within forecasts at 0.1%. The healthy Swiss trade balance in the last release was printed at 2.87 billion which was well beyond market analysts' projections at 2.77 billion but below the previous flash at 3.58 billion.

Policy makers seem satisfied for now with a gradual depreciation in the exchange rate. However, intervention pressure could mount, should the ECB extend or increase its QE programme.

On technical perspectives, EURCHF after yesterday's sharp dips, a sharp pull back with today's upswings on daily charts continue to persist with clear converging signals from RSI (14) and stochastic curves. Though EUR/CHF reached a new post-floor high in mid September (1.1050), the pace of appreciation is painfully slow. But we do not expect that to change. Support comes in at 1.0880 - that also coincides with the 40dma. A break through there may set us up for a short-term retracement.

We have positioned for higher EUR/CHF in options with a risk reversal but the long tenor (1Y at entry, expiring July 2016) shows how long we expect this process to take. Technically there is a reasonably well-defined rising trendline for EUR/CHF, dating back to the start of the current move higher in July.