With U.S. and eurozone interest rate cycles at or close to their end as the conflict in the Middle East is curbing the will to take more risk and potentially sparking intervention to cap the Swiss franc, EUR/USD may see this year out at familiar levels.

EUR/USD has rarely ventured outside 1.05-1.0 this year and moves beyond those limits have been swiftly reversed.

Should SNB intervene to suppress the surge in the franc's value resulting from the conflict in Israel, the rebalancing of reserves - which sees 75% of any francs sold held in dollars and euro - will help to contain EUR/USD suppressing volatility that has risen in the last few weeks.

The conflict will lessen the chance of further interest rate hikes in either the U.S. or eurozone and although that will maintain a small advantage for the dollar, traders who have seen EUR/USD slump from 1.1276 to 1.0448 since July must be wary about selling low.

War is not conducive to carry trades and at these lower levels the risk of adverse currency movement probably outweighs any interest rate returns.

The number of EUR/USD longs weighing has been reduced by two thirds while the pair have gone from the overbought situation which capped it in July to an oversold situation which has spurred October's rebound.

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