There are few fresh factors for the Swissie to take heart from. Thin safe-haven flows overnight despite rumours of another North Korean test, although these have subsequently been quashed, and worries persist over the early 07 outlook for the Alpine economy. As a result the USD/CHF rally from yesterday has mostly consolidated around the 1.27 mark with key resistance at 1.2735 (61.8% Fibo) seen as within striking distance on the topside. Against the Euro the Franc continued to move lower with the cross printing 1.5950 in early European action to remove one-touch options at the price.
Option players do note that residual interest at the price remains and will continue to be defended but bids from 1.5930 back to 20 are looking to keep the topside close and 1.5975 & 1.6000 are now being called viable medium-term targets. With the focus turning to the key 1.60 level the SNB could once again vent their concern. Despite their recent claims "the SNB has no FX targets" it is fair to assume that CHF/EUR rates at 0.625 will be a bitter pill to swallow and could begin to have an inflationary bite in the medium-term if sustained.
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