More unwinding of EUR/CHF longs looks likely, due to the growing uncertainty in Greece and the increased likelihood that the SNB won't raise its EUR/CHF floor, Citi says. This could happen in the "coming days", it adds, and could lead to further upside pressure on FX implied volatility and prop up demand for EUR/CHF downside protection. "We further notice that, despite the steady unwinding of EURCHF longs of late, there are still sizeable stops just below the EUR/CHF floor at 1.2000," Citi adds. "This in turn, highlights the risk of a sizeable initial drop in EUR/CHF in the [less likely] event the peg is temporarily breached," it says. EUR/CHF is at 1.2010.
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