Sentiment for the Swiss francs on extreme level

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Written by Patrick Hussy | 24 July 2017
Posted in Special research

In the last few weeks, the Swiss franc has clearly deteriorated in value against the euro. The strong Euro thus also radiates to the Alps Republic. The reaction of investors to this is euphoric. The sentiment for EUR / CHF reaches the state of euphoria with +46 percentage points. Consequently, the air is thin for a further rise - at least in the short term.

Since September 2016, sentix has also collected sentiment data in the weekly investor survey for the Swiss franc. The current value of 46 percentage points is a new all-time high in the young data history. This value describes the percentage bull overhang. This development is certainly not due to an explicit devaluation of the Swiss franc, but rather to the global euro appreciation trend as well as to a distinct greenback devaluation. In comparison to the dollar, the Swiss franc could significantly appreciate.

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sentix Sentiment – EUR/CHF vs. exchange rate EUR/CHF

From the statistical analysis of the sentix sentiment data series it can be seen that such extreme values usually have a contrarian effect on the markets and result in a counter-movement in the following four weeks. However, a big top building process is at risk if the market is withdrawn from the same investors by medium-term trust. Sentix measures this factor with the help of the strategic bias. For the EUR / CHF exchange rate, the strategic bias has also been rising for weeks; this trend is a stable confidence base for the Euro (without figure). A weakening of the franc against the euro thus appears to be sustainable. Consequently, the measured sentiment-extreme could be interpreted rather to be a breather than to be the final end of the upward movement for EUR / CHF.

 

Background

The sentix Sentiment indices, which capture investors’ 1-month expectations for a broad range of financial markets, are calculated on a weekly basis since 2001 as part of the sentix Global Investor Survey. The sentix sentiment reflects human emotions – between greed and fear – of market participants. Negative sentiment extremes are usually a straight indication for rising prices. High optimism, in contrast, may be a warning signal for an upcoming market consolidation. A sentiment divergence mostly indicates more important turning points.

The latest sentix Global Investor Survey was conducted from 20-July to 22-July-2017 with about 968 individual and institutional investors participating.

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