EUR/CHF eyes test of monthly lows in 1.0360s despite indications of heightened SNB intervention

• EUR/CHF is eyeing a test of earlier monthly lows in the 1.0360s.
• Last week’s Swiss sight deposit data showed the SNB stepping up intervention
• It remains to be seen where their “line in the sand” is, but technicians may target an eventual move under 1.0300.

EUR/CHF edged lower on Tuesday, dropping from Asia Pacific session highs in the 1.0390s to current levels in the 1.0370s, as the pair eyes a test of monthly lows in the 1.0360s. EUR/CHF bulls will be disappointed by how the recent improvement in risk appetite over the course of the last week hasn’t translated into a sustained rebound or challenge of the December highs in the 1.0460s. It may well be that inflation differentials, where the value of the euro is being eroded at a faster rate than that of the Swiss franc, continue to gradually weigh on the pair, something the SNB pointed out earlier in the monthly.

Speaking of the SNB; Swiss sight deposit data released on Monday showed that the amount of cash held by domestic Swiss banks with the SNB rose to CHF 650B last week from CHF 645.7B the week before. The sharp rise above 650B last week comes after deposits had spent the prior six weeks ranging between a CHF 644B-647B range and will add to suspicions that the SNB has recently upped its forex interventions in order to curb CHF strength.

While it is unclear as to where the SNB’s new “line in the sand” is for EUR/CHF, the recent uptick in intervention suggests the bank likely doesn’t want to see the pair push substantially below December’s lows in the 1.0360s. From a technical perspective, the next key area of support for EUR/CHF is in the 1.0230s. It remains to be seen whether or not the SNB will allow the pair to fall to this level. Over the course of the rest of the week, trading conditions are likely to remain somewhat subdued with FX markets still in holiday mode.