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Mar 12 - 10:55 AM

RBC: A General Low Conviction in FX but Shorting CHF a Prevalent Strategy

By eFXdata  —  Mar 12 - 10:04 AM


RBC discusses the current sentiment in the FX market, noting a general low conviction among investors. However, a prevalent strategy among those taking FX risk is shorting the CHF, with long EUR/CHF and especially long USD/CHF positions being notably popular. The expectation that the Swiss National Bank (SNB) would lead G10 central banks in rate cuts has partly fueled the short CHF narrative. Despite these positions, the CHF has only slightly retreated from its significant gains over the past 18 months.

Key Points:

  • Investor Positioning: Anecdotal evidence suggests a preference for long EUR/CHF positions, but data indicates that long USD/CHF positions are more heavily positioned.
  • CHF Valuation Changes: From Q2 2022 to now, EUR/CHF has moved from the 1.02-1.05 range to 0.9600, and USD/CHF has shifted from parity to 0.88, reflecting significant CHF strength.
  • Carry Trade Potential: The CHF's efficiency as a funding currency, alongside the JPY, for engaging in high-yield carry trades could be a key driver for future CHF weakness.
  • Technical Analysis: The USD/CHF pair is at a technical crossroads, with resistance identified at 0.8886 and support at 0.8728. The currency briefly surpassed the channel top in late February but has since retraced.


RBC highlights a cautious yet observant stance on CHF positions, noting the currency's past gains and its role in carry trade strategies. The bank suggests that a resurgence in the carry trade could prompt further CHF weakness. However, the technical outlook remains uncertain, signaling a critical period for investors holding short CHF positions, particularly in USD/CHF. The anticipated actions of the SNB in comparison to other G10 central banks will be crucial in shaping future CHF movements.

RBC Research/Market Commentary


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