I have gone long June EUR/CHF. The market has fallen back to a level where it is possible to get a stop below the SNB’s 1.20 floor, such that a profit of 1x capital at risk can be achieved if the market simply returns to its recent levels. The market is at its lowest level since the few days after the floor was instituted. It is true that Philipp Hildebrand has had to resign so SNB policy is less clear than usual — but if anything it would make sense for the SNB to raise the floor, not lower it, and an abandonment of the floor would be a significant reversal. It may well be the uncertainty surrounding Hildebrand’s departure that has provided this entry opportunity. It is also true that the ECB has recently done a major liquidity operation and that EUR rate expectations are declining, which are bearish factors for the EUR; but EUR/CHF is driven by risk-aversion, not the interest-rate differential, and in any case short-term Swiss rates are negative. The most likely downside risk is that the market flatlines (as it did in 2010 at a previous floor) and ends up below my entry price if and when the peg is removed, or when I get tired of the trade. It would only take a small rally in EUR/CHF to put this trade well into profit.

I have put the stop at 1.198, to allow for a little leeway, and paid up for an IG Index guaranteed stop, just in case the peg is abandoned over a weekend, say, and the market collapses.