CHF could strengthen. EUR/CHF below parity?

If one looks at the characteristics of the Swiss Economy and its currency, which is bought in times of uncertainty and Risk off sentiment, it means that might go up and particularly against the Euro and move lower even below parity.

Many technical analysis and FX valuations show that CHF is overvalued, but these models are not suitable for a small and open economy like the Swiss.

The measures and techniques that are taken under considerations do not account for situations in uncertainty and turmoil that investors will seek out and buy the CHF due to its safe heaven status.  and now during the 2017, there are some high risk situation that may occur and we might see EUR/CHF at parity or a bit below.

Factors like the negative interest rates for the Swiss and expected higher rates and 30 year financing rates in the USA, are perfect factors for lower CHF, but during the first part of 2017 is not the case. so far.

Higher inflation and better inflation expectations in the Euro zone than the Swiss economy will keep pressure on the currency for now.

The markets continue to price in that SNB will cut is negative rate even further and if the inflation prove higher than expected this will support the CHF. Analysts from Nomura think that SNB will leave the rates unchanged and will not continue to loosen monetary policy any longer during 2017 and this will put upward pressure on the currency.

If the elections in Europe do not bring any unnecessary uncertainties and negative sentiment, the pair could continue up from here, but still within 3 to 6 months the SNB will be in a tough situation.

The trend for the pair is short and with political and economic uncertainties raising this year, we could very well see parity level for the pair.

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