Forex News and Events
As the November 30 « Save our Swiss Gold » referendum approaches, the recent polls continue showing balanced results. According to an end of October poll in a Swiss popular newspaper “20 minutes”, the chances for a “no” vote is still 47%, verse 38% “yes” and 15% left to decide. The poll results from the Institute gfs.bern are even more alarming, with 44% preference for a “yes” vote, 39% “no” and 17% undecided.
At this stage, it is still difficult to predict the direction Swiss people will favor. Swiss voters will examine closely the voting material “easyvote”, weigh pros and cons and voice their preference. The advertisement to “Save the Swiss Gold” already decorate Swiss streets’ panels. 'Yes' or 'no': It is time to play it intelligent for the Swiss voters. One thing is clear: the official recommendation is unquestionably negative.
Negative recommendation from Swiss “easyvote”
Easyvote is an official document to walk Swiss voters through the advantages/disadvantages of voting proposals. Regarding the November 30 referendum, the advantages of a 'yes' vote are stated as follows:
- In two, three generations, Gold will still have value therefore represents a safe investment. The gold is secure in Switzerland. Stocking gold in Switzerland minimizes the risk of counterparty in times of crisis.
The disadvantages are enumerated as:
- Switzerland has already enough reserves in gold, approximately 1’040 tones standing for 8% of SNB holdings. There is no need to hold additional gold. In addition, the SNB should be free to sell its reserves in gold, as privileged payment facility, in case of crisis. This proposal would prevent the SNB from selling its gold.
Two chambers of the parliament and the government are substantially against the initiative (National Council: 22 “yes” vs. 156 “no”, 20 undecided; Council of States: 2 “yes” vs. 43 “no” and Federal Council: “no”).
Swiss National Bank disapproves
The stress level in the SNB mounts as the polls show balanced results. The introduction of such constraint will certainly be counterproductive for the SNB from a portfolio management point of view. The Swiss National Bank exceptionally voices political preference, warning that a “yes” vote will squeeze its ability to protect the EUR/CHF floor. SNB President Thomas Jordan has been quoted on Neue Zuercher Zeitung insisting “The initiative is not in Switzerland’s interest because it aims to fundamentally change the rules of our monetary policy”. And we can clearly see tensions on the EUR/CHF markets. EUR/CHF hit 1.2014 for the first time since end 2012. Large option expiries favor CHF longs against EUR below the very critical 1.20 floor for the month ahead. There are fundamental forces the SNB should fight against: the ultra-expansive ECB and the upcoming gold referendum. These external factors are in favor of a stronger Swiss franc. We stand ready for a surprise intervention from the SNB should the tensions on the 1.20-floor do not ease.
The gold markets currently price out the “yes” outcome, the XAU/USD took another dive to $1,137.94 yesterday, for the first time since first half of 2010. The key support is placed at $1,000/1,045 (psychological level / February 2010 low, 5-year low).
Will Swiss voters show trust in the SNB and give the bank the freedom of managing its 470 billion franc worth portfolio without legal constraints? Will they honor the SNB’s sophisticated portfolio management efforts and recognize the SNB’s success in fulfilling its duties (price and financial stability, protection of 1.20 floor) over the past years of heavy global crisis? Or will they be trapped in the démodé view of safe-haven gold?
Swissquote SQORE Trade Idea:
TTR CA Daily Model: Sell XAG/USD Silver/USD at 15.283.
Today's Key Issues (time in GMT)
- 2014-11-07T10:30:00 NOK Industrial Production -£9500 exp
- 2014-11-07T14:30:00 USD Unemployment rate 5.9% exp / prior
- 2014-11-07T14:30:00 CAD Unemployment rate 6.9% exp/prior
- 2014-11-07T14:30:00 USD Change in Nonfarm Payroll 235k exp, 248k prior
The Risk Today
EUR/USD has broken the hourly support at 1.2440 (03/11/2014 low), confirming persistent selling pressures. A support lies at 1.2242 (10/08/2012 low). Hourly resistances stand at 1.2457 (05/11/2014 low) and 1.2533 (06/11/2014 high). In the longer term, EUR/USD is in a downtrend since May 2014. The break of the strong support area between 1.2755 (09/07/2013 low) and 1.2662 (13/11/2012 low) has opened the way for a decline towards the strong support at 1.2043 (24/07/2012 low). A key resistance stands at 1.2886 (15/10/2014 high).See SQORE for addtional FX trading strategies and Trade Ideas. http://en.swissquote.com/fx/news/sqore
GBPUSD declined sharply yesterday and broke the key support at 1.5855. A support now stands at 1.5718 (21/08/2013 high, see also the 61.8% retracement). Hourly resistances can be found at 1.5887 (intraday low) and 1.5955 (intraday low). In the longer term, the break of the support at 1.5855 (12/11/2013 low) confirms an underlying bearish trend. Next supports can be found at 1.5718 and 1.5423 (14/08/2013 low). The long-term technical structure remains negative as long as prices remain below the resistance at 1.6227 (09/10/2014 high).
USD/JPY's rise is deeply overbought. However, no sign of sustainable selling pressures has occurred thus far. Monitor the test of the hourly resistance at 115.52 (06/11/2014 high). Hourly supports can be found at 114.06 and 113.17 (04/11/2014 low). A long-term bullish bias is favoured as long as the key support 105.23 (15/10/2014 high) holds. The break of the major resistance at 110.66 (15/08/2008 high) opens the way for a further rise towards 120.00 (psychological threshold, see also 61.8% retracement of the 1998-2011 decline).
USD/CHF has broken the resistance at 0.9691, confirming the new lows made in EUR/USD. Next resistances can be found at 0.9751 and 0.9839. An hourly support lies at 0.9673 (intraday low). Another support stands at 0.9580 (04/11/2014 low). From a longer term perspective, the technical structure favours a full retracement of the large corrective phase that started in July 2012. The recent new highs above the key resistance at 0.9691 confirm this outlook. A strong support stands at 0.9368 (15/10/2014 low). A key resistance can be found at 0.9839 (22/05/2013 high). See SQORE for addtional FX trading strategies and Trade Ideas. http://en.swissquote.com/fx/news/sqore.
