EUR/CHF subdued close to 1.0400 level as traders mull whats next for 2022

• EUR/CHF has been trading subdued on Thursday, at one point dipping under 1.0400, but subsequently recovering back above the big figure.
• Over the next few sessions, EUR/CHF will likely stick well within recent 1.0370-1.0470ish ranges amid the end of year holiday lull.

Having found resistance at its 21-day moving average at 1.0422 earlier in the session, EUR/CHF dipped back briefly under the 1.0400 level but in more recent trade, has recovered to just above the big figure. Market participants suspect the SNB has become more active in propping up the pair in recent weeks amid a pick-up in Swiss sight deposits over the last two weeks. That likely rules out any move under recent monthly lows in the 1.0370 area for the time being.

Recent selling pressure is somewhat surprising in light of the drastic improvement in the market’s appetite for risk over the course of the week. Positive updates from the scientific community that Omicron, as hoped, is significantly less likely to cause severe disease versus the delta variant, reducing the pressure on European governments to lockdown as aggressively, has been the main driver of the improvement in risk appetite. But on the week, EUR/CHF is only up about 0.2%.

Still, in light of the eleven weeks straight of negative returns seen between September and the end of November, that saw the pair drop from above 1.0900 to near current levels in around 1.0400, the EUR/CHF bulls should likely be thankful that the selling pressure in December has abated. Over the next couple of sessions, subdued trade that keeps EUR/CHF well within recent 1.0370-1.0470ish ranges is likely to continue amid the end of year holiday lull.

When 2022 kicks off and markets return to normal trading conditions, the big question for EUR/CHF will be whether improvements in global risk appetite as Omicron fears ease and the ECB’s comparatively hawkish stance versus the SNB will be enough to trigger a sustained rebound in the pair. Alternatively, inflation differentials between the Eurozone and Switzerland that continue to erode the purchasing power of the euro faster than the Swiss franc may continue to put downwards pressure on the pair.