The SNB intervened in the forex market to weaken the Swiss Franc. Though still above the levels before the intervention, USD/CHF has lost its hot air, and is now trading lower. A lesson about central bank interventions.
On Wednesday, the Swiss National Bank intervened in the forex market in order to weaken the Swissy. Switzerland’s export based economy suffers from a strong Franc, and the SNB wanted to help the economy.
The intervention came at a low point – when USD/CHF was trading at 1.0630. The SNB pushed the pair up to 1.1080, 350 pips higher. I wrote a post about how an intervention from a central bank is only temporary, and provides a great trading opportunity.
USD/CHF closed the week at 1.0834, significantly lower than the peaks reached after the intervention. In fact, almost 250 pips lower. The Swissy didn’t fall to the lows at the time of he intervention, but fell to the levels it traded during the week.
Note that also against the Euro, the Swiss Franc had a renewed strengthening: EUR/CHF rose from 1.50 to almost 1.54 due the central bank’s work, at finished the week at 1.5229.
So, a central bank intervention is an excellent trading opportunity – the currency pair will get back to normal very soon. It won’t necessarily get back to the price at the time of intervention, but a serious retracement to previous trading levels is bound to happen.
Remember this lesson towards the next intervention!
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