Swiss National Bank shocked the market by abandoning the Euro floor

January 16, 2015

The Swiss Central Bank caught the market unawares yesterday as they gave up the 1.20 floor of Euro Swiss, having yet promised last December to purchase an unlimited amount of foreign exchange to support the level. It is a slaughter to those who by that time were still betting on a weak Swiss Franc.

EUR/CHF once slumped over 30% to 0.80 in a couple minutes and is now stable at the 1.01 level this morning while the USD/CHF also fell by over 27%. The Swiss Central Bank probably feared that the cost of maintaining the 1.20 level would be significantly higher after the ECB announced a new round of QE.

EURCHF 160115 | Vantage FX

The Euro Dollar also refreshed new lows to 1.1570 after the Swiss Bank decided not to be the last buy side player of the market.

Other currencies were also affected by the biggest event FX market in almost 30 years’ time. The safe-haven demands supported the Yen. Dollar Yen fell to 116.20 this morning. The consolidation may continue as the market focus will stay in Europe for a while.

USDJPY 160115 | Vantage FX

The Gold prices rose to four-month-high of $1266 and broke the $1240 resistance. We now can see a head-and-shoulders pattern in the daily chart. It is another surprising result for yesterday. Technically, the gold prices may rise to around $1350. I am not confident about this target for now. Let’s see whether the price will stay beyond $1240 for a few days later.

XAUUSD 160115 | Vantage FX

Back to stock markets, the Shanghai Composite surged by 3.54% to 3336 after funds released from IPOs. ASX 200 fell by 0.42% to 5331. The Nikkei Stock Average gained 1.86%. The losses for the European markets were even worse. The Swiss market slumped by about 9% with higher exchange rate, while other European markets gained. The UK FTSE was up 1.73%, the German DAX rocketed 2.20% and the French CAC Index rose 2.37%. The US market fell for the fifth day in a row. The S&P 500 closed 0.92% lower to 1993. The Dow lost 60% to 17320, and the Nasdaq Composite Index dropped 1.48% to 4570.

On the data front, Euro-area final CPI will be released at 21:00 AEDST. The US CPI will be out at the midnight.

Have a great trading day!
Anthony


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