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The Great Swiss Opportunity
By Sean Hyman, Editor of Currency Cross Trader Dear Sovereign Investor Subscriber,
Dear Sovereign Investor subscriber,
When you think of Switzerland, you might think of their famed Alps – or you might even think of the Davos meeting, or their Swiss banks.
However, when I think of Switzerland, I recall the one thing that has plagued them for the past five years – the relationship of the Swiss franc to the euro.
Until 2008, the euro gained on the Swiss franc and the Swiss were happy, because they are huge exporters of things like watches and chocolates.
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Switzerland's biggest customer is in the rest of Europe, and all those customers use the euro.
When the euro was gaining against the franc, Swiss goods seemed inexpensive to buy. But then came the financial crisis of 2008, and the EUR/CHF exchange rate began to plummet.
How the Swiss Have Suffered It has been on that downward trajectory for five years now.
The euro got weaker and the franc grew stronger. Swiss exporters were crying the blues, because the rest of Europe could not afford their chocolates and watches as easily now.
So the central bank got to work. First, they tried to "talk their currency down" by making comments to the public that should have undermined the franc, but that didn't work.
Then they took the next step, which was to intervene in the currency market by selling francs and buying euros. Of course, almost all currency interventions only work in the near-term; they almost always fail long-term.
So when individual interventions did not work, they decided to establish what some people refer to as a "peg" – although it was more of a "floor" at CHF1.20 per euro, and they didn't want the exchange rate to drop below that.
Whenever the exchange rate did attempt to dip below this floor, the Swiss central bank would simply intervene to support the currency.
And this went on for almost a year and a half. Tons of francs were sold and tons of euros were bought.
Well, not only is their central bank now about to get a breather and see things turn their way for the first time in five years, but their economy is also about to catch a break for the first time in half a decade.
So, let's take a look at the EUR/CHF exchange rate over the last 10 years, so you can see what I'm looking at.
EUR/CHF Breaches the Crucial 1.24 Level
See larger image
And here's the opportunity… for well over a year now, EUR/CHF hasn't even been a tradable instrument (from a practical standpoint anyway), because the CHF1.20 floor kept the exchange rate trading in about a 5-10 pip range. But now… EUR/CHF is in the Process of Turning Around As of last September, EUR/CHF awoke from a Swiss central bank-induced coma and the exchange rate finally began to rise – a boon to both the central bank and exporters.
In just the last week, the EUR/CHF exchange rate rose more than 300 pips. That's huge for a currency that has hardly moved. And not only is its swift rise important, but so is the level that it's at right now.
EUR/CHF's five-year decline is now sitting around a downtrend line that has been in effect for four of those years. And that downtrend line meets the exchange rate's price at around the CHF1.24 level.
As I'm writing this, the pair has traded above that level. If it can hold above CHF1.24 over the next week or two, we're going to see EUR/CHF head back up into the 1.30s – and that's a profit opportunity.
Even if that move does fail, it will likely take out the downtrend line and begin its new uptrend upon its next approach – and that will be soon.
The Swiss Economy Gets a Boost
Either way, the change in the trend direction of EUR/CHF into a new uptrend is going to put the wind at the Swiss economy's back for the first time in five years.
With this kind of knowledge, there are at least a couple of ways to profit.
The most pure play is to simply buy the EUR/CHF pair in the Forex market. So for those of you with a Forex account who are comfortable trading in the leveraged Forex market, this may be the best way to profit.
However, for those that have never ventured into the Forex market, there is another simple way to play this.
Since the Swiss economy has been held hostage for the past five years by the EUR/CHF exchange rate, it's no surprise their stock market has gone nowhere during that time as well.
In fact, let's take a look at an ETF below that tracks Swiss stocks on the weekly, 10-year chart. Swiss Stocks Will Awaken As EUR/CHF Holds Above 1.24 
See larger image So the other way that you can easily play the change of trend direction in EUR/CHF is to buy an ETF that tracks Swiss stocks, like EWL, as shown above.
Swiss stocks have been consolidating in a range for five years, but they've been waiting for the proper catalyst to trigger a break-out and I believe we have that catalyst as EUR/CHF begins to hold above the 1.24 level. Swiss stocks look as though they will finally get their much-needed lift.
Have a nice day!
Sean Hyman
Editor, Currency Cross Trader
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Chart of the Day
Currency Moves and Chart Pattern Foretold of a Stock Market Move As many of you may know, my background was in stock trading before I became a currency trader. However, I've often found that by watching currency movements, it tipped me off to many "sweet" stock market moves ahead of time too.
As an example, back in November, I began talking to you about a trend change in the yen. A rising wedge – which ended a diagonal pattern, had just completed as the yen fell through the bottom of the pattern. Additionally, the yen broke a 5-6 year uptrend line as well.
This trend change in the yen showed me that an upswing in Japan's Nikkei was coming.
You see, the Nikkei is chock full of huge exporters, like Toyota, Honda, Sony and Panasonic to name a few. These Japanese companies prosper the most when the yen is declining. This is when the rest of the world views Japanese goods as being inexpensive due to the more favorable exchange rate, which comes about by a weakening yen.
But here is the nice thing. When the yen's decline started, then the Nikkei broke out about a month later. So this gave traders plenty of time to get positioned before the actual stock market breakout came.
Let's take a look at what this looks like below. The Currency's Trend Change Foretold of the Coming Rally in the Nikkei
 See larger image The yen broke down in mid-October.The Nikkei then broke above its ascending triangle pattern in mid-November just as the chart shows. It's evident what kind of influence the diving yen has had on the Nikkei stock index.
I was in a meeting in December at the Ritz Carlton in West Palm Beach telling a group, that not only was the yen falling, but it was going to fall much faster and go much lower than most would ever expect.
Believe it or not, even as much as the yen has fallen thus far, it still has much more to go. Oh sure, it will have a bounce at some point… but then the huge decline will continue!
This will continue to keep Japan's Nikkei as one of the top performing stock indexes of 2013. How do I know? Because the weekly chart's multi-year rectangle patterns indicate a sustainable breakout. The minimum price targets from the patterns I study were so wide that I knew the yen would travel far. I also knew that it would likely be a sharp move because, typically, the longer the range, the sharper/stronger the trend is once it breaks out of the mundane range.
Have a nice day!
Sean Hyman
Editor, Currency Cross Trader | | TODAY'S EDITOR | Sean Hyman
 In his Currency Cross Trader service, Sean helps his subscribers navigate the $4 trillion Forex market to find which currencies are on the rise, and which are set to fall. Click here for his latest report. | | Featured Video | 
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