The EUR/CHF pair has climbed back above parity over the past week after bouncing off support for the 200-day moving average at around 0.9930, explained analysts at MUFG Bank. They see that price action supports their view that there is still room for the cross to rise back towards the levels that were in place during the second quarter of last year at closer to the 1.0500-level.

Key quotes:

“Euro-zone economies are proving more resilient over the winter period, and leading indicators such as the PMI surveys released over the past week have further dampened recession fears. The warmer winter weather has also meant that natural gas inventories are holding up better than expected in Europe putting additional downward pressure on prices. The favourable developments provide more support for the EUR at the start of this year. Given the CHF’s role as a regional safe haven currency, the CHF should weaken as downside risks in the euro-zone continue to ease.”

“We also believe there is room for EUR/CHF to play catch up with the move higher in EUR/USD since late last year. The SNB has been intervening to support the CHF recently. With inflation pressure globally and in Switzerland now easing, the SNB could become more tolerant of allowing the CHF to weaken somewhat.”