Still long EURCHF - even looking to load up more.

 A couple of weeks ago, I wrote a fairly in-depth piece on why I am long EURCHF. So far, this trade hasn't gone particularly well, but I'm still confident in the trade and choose to remain long. 

As outlined in the original piece, the main reason why I'm bullish EURCHF is because the SNB will not tolerate excessive FX strength. Previously, we have seen aggressive selling of CHF when we get below 1.07. This is likely to continue in my view, so with CHF where it is now I am confident to maintain my long positions. Likewise, if we have a look at the long-term trends (since the start of the year) below, it is pretty clear that we are near the bottom of the range, and I'd expect a bounce higher. 

Source: FXPro (MT5)

(Yes, I'm aware the overall trend is still down and usually the trend is your friend, but my lesson has always been don't fight the central bank).

For me, with other central banks of the world turning increasingly hawkish on the back of inflation, the comparatively dovish SNB does not represent a good place to put your money. Sure, the CHF is a safe-haven, and this likely explains some of the recent strength, but the currency is looking extremely over-valued in my view. 

What I also find quite interesting is how quickly CHF has appreciated against the other G10 safe-haven: the JPY (see below). This levels of appreciation at such pace is really quite surprising. Sure, we've seen about a 30bps increase in CHF 10y yields, and this is significantly more than what we have seen in the JPY compression. But my question is, how much higher can CHF 10y yields go? The SNB has rates at -0.75%, and the economy is fundamentally deflationary. 

I personally don't see a reason for the SNB to hike before 2026 assuming current inflation is largely transitory worldwide. They certainly won't move before the ECB and are committed to easy money. Sure, their definition of price stability is a bit different to others - seeking CPI below 2%, but we are still nowhere near that level. 

I suppose... you could make the argument that the CHF economy is doing very well, and therefore it's a good place to invest with low inflation etc, but I'm still not that convinced by this argument. 

Ultimately, most of my view on CHF comes from the fact that the SNB simply is not going to allow much more currency strength - here's a chart of their foreign exchange reserves (which are acquired by selling CHF) and the SNB has repeatedly intervened to affect the FX rate. 

SNB reserves are well in excess of Swiss GDP, and this shows they do have the power to significantly influence the economy. Back in 2015, they promised to sell unlimited amounts of CHF in order to keep the exchange rate from being too strong - and I wonder if we might see something similar again before too long. 

Basically, get long CHF. I don't actually think we need a SL since I'd be amazed if we got anywhere close to 1.05, but TP anywhere you like - I'm targeting 1.10 over the next couple of months.