ASSET 1- EURCHF LONG

Last September SNB has introduced a peg between the swiss franc and the euro at 1.20 level stating that it will protect it with unlimited ammounts. Immediately after the announcement the market explode from 1.10 to 1.21. Since then it has been trading  higher. Many asset managers are scepticals about  the peg and express the belief that the market will break it very soon. Their main arguments are:

1. Every Central Bank that has introduced a peg on its base currency has been violated by the market.(see Bank of England, Thailand, Argentina) 
2. SNB has failed to weaken  the Franc decisevely  in all previous interventions that has made(the same example also applies for the Bank of Japan) 
3. If SNB continue to print money will very soon have to face inflation threat.

My personal opinion however is totally different. I believe that SNB will manage to defend its peg succesfully. It has done it before during the late seventies  when swiss franc was also facing the same threats

As a result none of the above arguments are risght in my opinion and i will explain:

"Every Central Bank that has introduced a peg on its base currency has been violated by the market.(see Bank of England, Thailand, Argentina)".   WRONG!- SNB has introduced a peg during late 70s and was able to defend it sucessfully and break the back bone of the swiss franc -bulls. The main diference compared to all the other failed intervention is that SNB is faced with an increased demand for its currency compared to the other who were faced with an increased supply.

"SNB has failed to weaken  the Franc decisevely  in all previous interventions that has made" -TRUE However in none of the previous attempts the SNB had gave a specific target taht was defending.

 

"If SNB continue to print money will very soon have to face inflation threat"- TRUE -However this will come very late since in the following months seems to be facing with deflationary pressures. Also this is something that came across duriing the first attmpt in the 70's and did not affect the currency directly

As a result  i will add as my first asset in my portfolio long 40,000 EURCHF @ 1.2160 and leave an option to buy some more if goes around the 1.2050-1.21 level. My stop loss is 1.20 and my first  target is 1.3200 and then 1.3800.I have no problem with the carry as it is positive. So as long as i dont get stopped i dont mind to hold the position. Below is the weekly graph of EURCHF