AFTER intense negotiations at the recent World Economic Forum in Davos, Switzerland, a deal with Greek bondholders seems imminent.

Last October, the bondholders agreed to take a 50 per cent cut in the face value of their bonds, worth more than 200 billion euros (S$331 billion). In a landmark discussion in Davos, politicians pushed for a 60 per cent haircut.

In the end, creditors seem ready to accept a lower rate, although it hasn't been cast in stone yet.

Crushed by 350 billion euros of debt and running out of cash quickly, Greece is desperate to see the deal through, because it will pave the way for it to receive its second bailout worth 130 billion euros.

If the deal doesn't go through, Greece will have no way to meet the 14.5-billion-euro bond payment due on March 20 this year.

Davos aside, European Union leaders met in Brussels yesterday to put the finishing touches to a German-led deficit-control treaty and endorse the statutes of a 500-billion-euro rescue fund to be set up this year.

Top news this week

China manufacturing PMI. Wednesday. I expect a reading below 50 (previous figure was 50.3). US non-farm payroll. Friday. I expect figures to come in between 140,000 and 170,000 (previous figure was 200,000).

Trade call

Long EUR/CHF at 1.2020

On Sept 6 last year, the Swiss National Bank (SNB) intervened in the forex market to prevent the franc from strengthening further. In a few hours, the EUR/CHF surged over 1,200 pips. The SNB said then:

"The Swiss National Bank is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate an EUR/CHF exchange rate below the minimum rate of CHF 1.20."

The current price on EUR/CHF is dangerously close to the set floor price of 1.20. In anticipation of an intervention by the SNB to defend the 1.20 peg, we will go long once prices touch 1.2020.

A protective stop is placed 70 pips below the entry price and we will have two targets on this trade, exiting the final position at 1.2160.

Entry price 1.2020
Stop loss 1.1950
1st profit 1.2090
2nd profit 1.2160

The writer is the founder and CEO of FXI Academy, which conducts lessons in forex trading.

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