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Minors, USD/CHF Forecast

Swiss Franc February 2013 – More Breathing Room for now

During February, the franc got some more breathing space: the rise of the euro across the board underpinned EUR/CHF, which temporarily crossed the 1.25 line. The Swiss authorities could have used the opportunity to sell some excessive euros and buy some of their local currency – the franc eventually strengthened, with EUR/CHF falling to around 1.23, but it still keeps a safe distance from 1.20.

Speculation about a higher peg, of 1.25 has decreased. Also in the other direction, there is no chance of seeing the peg removed altogether. Prices in Switzerland are still falling: CPI dropped by 0.2% and this certainly provides the justification that the SNB needs in order to push the franc lower.

* This article is part of the February 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.

It is interesting to note that while Japan’s currency policy comes under pressure from its trading peers, Switzerland is out of the limelight, and nobody considers labeling the country as a “currency manipulator”. Switzerland is not part of the G-20.

Also other figures support the policy: retail sales, the KOF Economic Barometer and the SVME PMI all remain pressured.

The franc could win against the euro during February, with EUR/CHF getting closer to the 1.20 line. As always, it is important to note that nothing lasts forever and that the levee could break, but this doesn’t seem likely right now.

Here are key economic releases in Switzerland for February:

  • February 5th: Trade balance, a speech by SNB board member Fritz Zurbrugg.
  • 7th: the SNB publishes its foreign currency reserves.
  • 8th: Retail sales.
  • 12th: Consumer Price Index (CPI) – more deflation?
  • 13th: Producer Price Index (PPI).
  • 21st: ZEW Economic Expectations
  • 26th: Employment level

The next SNB meeting is held in March.

USD/CHF is falling towards 0.90, and remains technically interesting.

USD/CHF Technical Outlook

USD CHF February 2013 Forex Forecast - Click image to enlarge
USD CHF February 2013 Forex Forecast – Click image to enlarge

January saw choppy trading for Dollar/Swiss, but eventually dropped to lower ground. Note the downtrend support that accompanies the pair since mid-2012.

Lines

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. 0.9080, which was a trough recently, is also worth watching. The battle around this line is raging. Note that this line defends 0.90.

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.