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Minors, USD/CHF Forecast

Swiss Franc December 2012 – No Chance of Lifting the Peg

The Swiss franc has recently shown more signs of life: EUR/CHF doesn’t cling that closely to 1.20, but has some breathing space. This makes USD/CHF a bit more interesting, especially as USD/CHF trades in a clear range.

During December, the SNB will make its quarterly rate decision. No change is expected in the decision to keep the 1.20 EUR/CHF floor and allocate “unlimited amounts” of currency buys. Thomas Jordan and his colleagues have good reasons to continue with the peg.

* This article is part of the December monthly forex report. You can download the full report by joining the newsletter in the form below.

  • Inflation remains low: CPI for the month of October was lower than expected – a rise of only 0.1%, lower than 0.3% that was expected. PPI actually dropped by 0.1%.
  • Manufacturing is contracting: While the SVME PMI rose from the low of 43.6 points, it is still under 50 points, with only 46.1 in October and 48.5 in November.

On the other hand, there have also been positive reports:

  • GDP in Q3 rose by 0.6% after contracting in Q2. This more than exceeded the low expectations of a gain of 0.2%.
  • Strong trade balance surplus: Switzerland’s trade surplus rose from under 2 billion to 2.82, also better than expected.

Despite the better news, recent comments from the SNB have shown that the peg is here to stay for a long time, at least until prices begin rising.

One of the tools proposed keep the franc down was negative interest rates. If Swiss banks and / or the SNB move in this direction, we could see further weakening of the franc. This also depends a lot on the situation in the euro-zone: an improvement there will certainly allow the franc to trade lower against the euro, and have more space against the dollar.

However, it is important to note that nothing lasts forever and that the levee could break. The SNB was lonely on the big for many months.

USD/CHF Technical Outlook

USD CHF Technical Analysis Decmeber 2012
USD CHF Technical Analysis – Click image to enlarge

USD/CHF made a move higher during November, reaching the round and strong 0.95 line. This line worked perfectly well and the pair returned to the bottom of the range: 0.9240.


1.09 capped the pair during 2010 and provided support beforehand.   1.0435 was support in 2010 and an area of struggle.

The round number of parity returns to the scene. It is backed by 1.0066. 0.9783 was a double top and provides strong resistance. It showed character in August 2012.

The round number of 0.95 worked as support and has psychological importance as well. After the breakdown, this line capped recovery attempts in September and in November 2012. It remains the top of the range.

0.9240 is the bottom of the current range, working quite well in October and November. It also provided some support back in March 2011. 0.89, is another significant support line that proved its strength early in the year and also back in 2011.

0.8567 is worth mentioning on the downside. It served as support on the way down and then switched to resistance. Further below, 0.8330 was a strong line of support.

0.7820 is the final frontier before the big plunge to the all-time low at 0.7066.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.