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Swiss franc: referendum results and reaction of the francOn Sunday, a referendum was held in Switzerland. There were two issues on the agenda: the initiative on "living money" and the law on gambling on the Internet. The greatest fear among investors was caused by the potential radical reform of the banking sector of the country (Vollgeld). In case of a positive vote for this initiative, the country was in danger of serious shocks. But unlike the British, the Swiss had the prudence not to cut the branch on which they sit. The result of voting on this initiative is a sure failure. Accordingly, the status quo is preserved in the Swiss banking system. As for the second issue - protecting consumers from the "harmful consequences" of online casinos from abroad, this initiative was supported. Recall, many Swiss believe that this is only the first step towards the introduction of "Internet censorship" for "unwanted sites." In total, nothing radical has happened. So, the flash crash of the franc has been avoided. The reaction in the foreign exchange market was by and large absent, which once again we note, is conditioned by the nature of the results of the referendum. Force majeure, which could occur, did not occur, accordingly, the fundamental background did not change. However, we still do not see any reasons for his purchases. The fundamental reason for lowering the franc this week could be the meeting of the Presidents of the United States and North Korea (scheduled for June 12). Peaceful statements from Singapore following the meeting should provoke a decrease in demand for safe-havenassets. Accordingly, the franc will become the object of sales. Technically, in pairs with the euro, the pound and the Japanese yen, there are good opportunities for franc sales. And the potential for its reduction in each of these cases is several hundred points. The bases are the same - these crosses are close to the boundaries of their medium-term ranges, which means that the probability of their reverse is high now. For example, in the GBPCHF pair, the growth target is 1.35 or even 1.38. In the EURCHF cross it is about 1.18 or 1.20. As for the pair CHFJPY, the target of the current movement is the area of 108.50. As you can see, the Swiss franc has sufficient potential for decline in the foreseeable future, which is worth taking, selling it primarily against the euro, the pound and the Japanese yen.
Long
by Trade24Fx
Warning! Flash-crash in CHF is coming!While all the attention of the participants of the foreign exchange market is focused on the Trump’s trade wars and the results of the G-7 meeting (which is already beginning to be called 6 + 1 because of the split among the participants), the political problems of Italy (the populist government is formed and its activity does not bode well) and Spain (corruption scandal in the government and its resignation), as well as the forthcoming meeting of the US President and leader of North Korea, a problem is emerging on the horizon that can outshine all of the above. But so far no one has noticed this problem.We are talking about a referendum in Switzerland that will be held on June 10 and hypothetically can lead to a revolution in the world of finance and banking, radically changing the alignment of forces in the banking system of Switzerland. On the agenda, the issue of so-called "living money" (Vollgeld) - an initiative according to which only the Swiss Central Bank (SNB) will issue money, and private commercial financial organizations will be deprived of this right. We are talking about non-cash money that is created by commercial banks (monetary aggregates up to M4), issuing a loan. In Switzerland, the share of electronic, or non-cash money, is about 90% of the total money supply. The authors of the Vollgeld initiative in fact demand to put an end to the practice of so-called partial reservation to deprive bankers of this opportunity and thereby limit the scope of financial speculations. If this monetary reform is approved, every loan that banks give out will have to be 100% guaranteed. In fact, we are talking about a radical strengthening of the role of the state in the economy and the attack on the holy-holy economy of Switzerland - the banking system.Why is there silence around the event in the information field? Nobody believes that the reform will be supported. The polls show a confident "no" following the voting results. In addition, both the executive (the government, the central bank) and the legislative branch (both chambers of the Swiss federal parliament are negative about this initiative) act against this initiative. Let's not say how much it reminds the state of things on the eve of Brexit: then, too, no one believed that they would vote for Britain's withdrawal from the European Union. But after all they voted, and the pound lost almost 2000 (!) points. A similar story we can quite observe and this time.What is the cause? The reform is too radical to be able to adequately assess its implications for the banking system and the economy of Switzerland. Accordingly, in the case of a “yes” vote in a referendum, the probability of a panic in the foreign exchange market vis-à-vis the Swiss franc is very high. The main reason for this is uncertainty. And this, given the status of the Swiss franc as a haven, in fact, the Achilles heel of the currency. According to some experts, the fall of the franc against the euro could be 10-15%. In total, we see an opportunity for great earnings. It is extremely rare to predict the time and place of flash crashes in the financial market. Now that rare case, when it is possible. One more interesting thing is that the situation is asymmetric. Rejection of the reform will not provoke purchases of the franc on all fronts, since it will mean the preservation of the status quo. But the vote "yes" about the reform will almost certainly provoke the sale of the franc. That is, sales of the Swiss franc on the one hand can literally gild, and on the other hand, practically do not carry any risks. Thus, there will not be a flash-crash, all the positions can simply be closed with minimal losses, or even in positive territory, if the markets decide to start a local correction in the franc. So, the deal looks very promising. Our recommendation is the sale of the Swiss franc from the current on all fronts.
Long
by Trade24Fx