The Swiss franc has risen from $0.86 in Jun 2010, spiking to more than $1.40 yesterday. Unfortunately, I did not have time to write this piece before its mini crash overnight. It was down more than 5% when I turned on my screen this morning.
So what’s going on with the Swissie?
No one outside the the central banks and their cronies knows the details of what’s happening or what will happen. But one can apply general principles and put together a big picture. That is my goal in this today.
Most people who have observed markets for any length of time can tell you that gigantic moves upwards after a long period of relentless upward moves generally do not end well. Silver had a massive spike to $49, before selling off to $34, a 30% crash. On Tuesday, Aug 9, the Swiss franc (CHF) moved from $1.32 to $1.39. Two days later, it has moved (so far) from $1.37 to $1.31. It’s currently below the opening price on Tuesday.
Whenever a price gets far enough out of whack, it tends to get back into whack.
OK, but this is just chart watching. I am not generally a believer that past price movements can predict future price movements. Let’s look at the fundamentals. First, the swissie is like all other “modern” currencies today: it is the debt paper issued by a central bank.