The world has witnessed pain across Europe with the globe not fully healing from the pandemic and a brutal war kicking off in Ukraine.
The European Union and other central banks across the world were ready to be hawkish on their monetary policy as inflation causes pressure on consumers and businesses... however, with the start of the war in eastern Europe, will this have a negative dovish effect as Russia announces over 500 dead troops.
What we've seen over the exchange rates alone is a huge dip in EURCHF at least, reaching lows last seen early 2015.
Logikfx Technology Summary
Throughout the analysis we've used the Logikfx technology page as our starting point. This summary gives us a high level view of the overall fundamentals in the market. One point to watch out for is currently, the time of war is a huge black swan event which disrupts market analysis and can cause huge swings in investor sentiment.
One day investors may see opportunity, the other they see risk and pull out.
Our view is based on only the underlying economic reports, which doesn't currently take into account any spontaneous events such as war.
What we're seeing overall is that potentially, EURCHF may be bullish soon, which is interesting considering it's taken a huge dip.... will this be a start of a rebound like we saw in 2015?
Macro Currency Strength Meter
The macro currency strength meter over the past few months has been up and down. We've seen both EUR and CHF take huge dips and jumps suggesting week to week data is fluctuating.
We've seen recently, the economic data suggesting a bullish move may be imminent on EURCHF as the fundamentals move towards a bullish economic score for EUR and bearish for CHF.
This aids our analysis by summarising the most recent economic reports into an easy to user strength meter.
In this case we can try keep an eye out for any bullish signals moving forwards.
Gross Domestic Product Differentials
The gross domestic product differentials overall have been positive over the past couple years. Most recently, the differentials are showing positive signs even moving into 2023, this long term fundamental indicator suggests over the long run EURCHF investors are bullish.
Trade Analysis (Imports/Exports)
Throughout the analysis we're seeing overall bullish signs, however, we're now moving into the relative analysis. We've analysing VW Volkswagen against EURCHF as VW is one of Europe's largest vehicle manufacturers.
What we've seen is a positive correlation between the two prices and VW has taken a huge dip in the past few months as scares of the eastern European war impact German companies. Especially the car market as Germany buys/ relied on a lot of gas/ oil from Russia.
The sanctions against Russia have therefore caused massive logistical issues and shortages.
We've also analysed Gold prices against EURCHF. There was a time long ago where Gold prices and the CHF were pegged, and the CHF was pegged against the Euro. This came to an end in early 2015 where we saw EURCHF drop significantly.
It's now actually reached similar lows as that period during 2015....
When we compare this against the gold prices, gold has been rising since then showing the inverse correlation.
Both commodities/ company we've analysed are going against our bullish outlook suggesting the idea may be a bit early but we'll want to keep an eye on the trade analysis for promising confirmation signs.
Interest Rate Differentials
The interest rate differentials for the past 5 years have been positive... a big reason being that Switzerland hold one of the largest negative interest rates in the world sitting at 0.75%.
This creates a positive differential as Europe still have a very small interest rate on their currency suggesting investors may rather hold their currency in Euros.
Hedge Fund Positions (COTA)
What we're seeing from a sentiment point of view is that EUR positions are going up from hedge funds and down for CHF.
This is shown by the blue line trending upwards and the dotted line downwards.
This created the differential line which is now diverging upwards meaning if this continues the market may agree with our idea overall.
Price Trends & Analysis
As mentioned earlier the price analysis we can see that EURCHF has reached new lows, nearly breaching the level seen where the CHF un-pegged itself from the Euro back in 2015...
The question here is will buyers come in at this level again and will we see a similar bullish trend over the next year or so, or will sellers push the market down even further.
One to watch out for.