Seeing the Sun through the Clouds—Review of the "Swiss Franc Black Swan Incident"

Back in time and space, back to January 15, 2015, when the US dollar fell by nearly 28,854 points (accurate to 5 decimal places) in a single day (essentially the appreciation of the Swiss franc), I still have lingering fears.

After the Swiss National Bank announced on January 15, 2015 that it would abandon the lowest "red line" of "1.20" for EUR/CHF, the EUR/CHF fell by 22,479 points on the day, and the USD/CHF fell by nearly 28,854 points on the day. Sheng, Interactive Brokers, Alpari and other large foreign exchange brokers suffered heavy losses. It is reasonable for investors who are long US dollar Swiss francs or euro Swiss francs (essentially to predict the depreciation of Swiss francs) to be blown up instantly, but for investors who are short US dollar Swiss francs or euro Swiss francs (essentially to predict Swiss francs Lang Appreciation) is "the opening of fate."

Because foreign exchange brokers equip investors with huge leverage, when encountering a huge market with a fluctuation of 10,000 points in a short period of time, they will either be crushed by the bulls of the entire market, or they will be crushed by the shorts of the entire market. It is easy to form the above-mentioned severe traumatic event.

Why did the Swiss central bank abandon "1.20"? As the biggest leader and rule maker of the Swiss franc market, as well as the defender of the Swiss economy, if encountering major disadvantages, he will definitely choose the strategy that is most beneficial to him.

From the perspective of the SNB, time needs to be moved forward. Switzerland, a haven of safety, became an island of tranquility in 2011 when the eurozone was in deep panic. The exchange rate of the Swiss franc to the euro has appreciated from 1 euro to 0.7 Swiss francs in early 2010 to the same level as the euro in mid-2011, and the appreciation has been very large in a very short period of time. In this way, the competitiveness of Swiss exporters' goods abroad will be weakened, and the appreciation of the Swiss franc is obviously not good for these export goods. In order to protect the Swiss economy, in the summer of 2011, the Swiss National Bank announced that the exchange rate of the euro to the Swiss franc should not be lower than the lower limit of 1.20.

The euro has been suppressed by the U.S. dollar and the forces behind it from the moment it was born. When the euro depreciated sharply against the U.S. dollar, which in fact caused the value of the Swiss franc to decline against the U.S. dollar. In January 2015, the Swiss National Bank continued to implement the Swiss franc against the euro The lowest exchange rate is unreasonable. That's why the Swiss National Bank decided to abandon the "Euro/Swiss Franc 1.20:1" choice. After the news was announced, EUR/CHF immediately fell to 0.97439:1.

The evolution of endogenous logic: the trend of EUR/CHF: 1.48783:1 in early 2010—not lower than 1.20:1 in the summer of 2011—abandoned the lowest value on January 15, 2015, the EUR/CHF plummeted, and the USD It also fell sharply against the Swiss franc. The Swiss franc appreciated sharply, and the Swiss economy was hit hard.

In-depth study of endogenous logic: investors and foreign exchange brokers who predicted the depreciation of the Swiss franc or failed to predict the huge appreciation of the Swiss franc were blown up in this wave. It was only because of "failure to recognize the true face of Lushan Mountain" that the disaster was caused The difference is that it is difficult for foreign exchange brokers to avoid the damage of the short-term 10,000-point market. Because it is difficult for brokers to take short positions in time unlike investors, it is tantamount to driving away all customers.

Tracing back to the source, who is the biggest beneficiary? The Federal Reserve, which caused the sharp depreciation of the euro, and the financial conglomerate behind it are the ultimate hunters behind it. The U.S. dollar also depreciated against the Swiss franc at the same time to pick up a short bargain, but the U.S. dollar is a strong currency after all, and it will return sooner or later, so the U.S. dollar and Swiss franc have a big V-shaped rebound; while the trend of the euro against the Swiss franc, due to Relative weakness of the euro, its rebound is relatively limited.