Monday, January 16th, 2012.

With the Swiss National Bank intervening last year and attempting to set a floor in the EUR/CHF cross at 1.20 the trading community is divided on whether or not the SNB will be successful in holding that floor.

When you couple that information with the likelihood that the membership of European Union will change within this calendar year an interesting hedging opportunity arises.

The SNB intervention can happen at literally anytime and many are forecasting a 1.35 if not a 1.40 goal for the new SNB floor.

This is also potentially a position that could be opened and closed repeatedly for incremental profit.

This entire situation is fascinating for the long time currency trader/observer who correlates the SNB and the CHF with sound currency and hawkish monetary policy. The opposite has become true in Switzerland out of sheer self preservation.

Switzerland is a country that relies heavy upon exports and tourism to support their economy. If they do not intervene they will definetly see hit to their GDP.

EUR/CHF fell hard on Friday as the pressure continues against the Euro as a whole. The EU saw nine countries get downgraded in the waning hours of trading, so the reaction isn’t necessarily baked into the chart currently. With this in mind, the rumors pushed the market down most of the day.

However, the Swiss National Bank has put in a “floor” at the 1.20 level just below, so selling isn’t possible, even in this environment. The intervention that almost has to happen at that level will be brutal and fast. However, the Euro is a bit difficult to own. The bounce that comes however could be very profitable if you see that intervention

(Sources: Milwaukee Story / FX Empire | Forex News, Analysis, Charts,Tools and Forex Brokers.)

Please note that this article does NOT constitute an investing advice.