EUR/CHF: Swiss Franc Looking Like A Key Safe-haven Trade For Europe

Republished By Plato

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European stocks drop to their lowest level in more than six months
Swiss franc stronger against most European counterparts (NOK and SEK firmer)
Overnight index swaps still not

A global bond market selloff European equities sharply lower and triggered some safe-haven flows towards the Swiss franc. The EUR/CHF daily chart shows prices have tentatively fallen towards the lowest levels since September 21st. Risk aversion is clearly in place given US lawmakers were able to tentatively avoid a shutdown but stocks are still selling off.

Earlier in London, the final PMI readings showed Germany and France heavily remain in contraction territory. German manufacturing activity posted its 15 straight contraction, but did deliver a 3-month high. France manufacturing PMI posted its 8th straight contraction and worst reading since May 2020.

The global growth outlook seems poised to deteriorate and that should lead to gloomier prospects for Europe. As soft landing hopes disappear in the US, the chances of a de-risking moment grow. If European bond yields continue to rise, the Swiss franc should outperform in the short-term.

EUR/CHF Daily Chart

As financial conditions continue to get uglier across Europe and that is starting to lead to more safe-haven flows towards the franc. Short-term downside seems like it could target the 0.9500 region. If bearish momentum remains in place, price action could fall towards the 0.9265 level which is the 78.6% Fibonacci retracement of the 2015 low to 2018 high move.

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Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.