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The Swiss franc certainly enjoyed the fear that gripped the markets, but was forced to retreat as SNB pressures mounted. The upcoming week consists of only one event, so the outlook will lean towards the technical analysis of USD/CHF, that digs lower.

Bernanke’s commitment to leave US interest rates unchanged until mid 2013 was one of the triggers for a stronger Swissy, that already enjoyed the downgrade of the US by S&P. Will it find new reasons to rise now? The SNB eventually had some success.

USD/CHF graph with support and resistance lines on it. Click to enlarge:USD CHF Chart August 15 19 2011

  1. PPI: Monday, 7:15. After the big drop in consumer prices (CPI), we can expect a drop also in producer prices, and is likely to follow the drops seen in the past two months, with last month’s drop of 0.5% being quite sharp. This is a result of the excessive strength of the Swiss franc.

* All times are GMT.

USD/CHF Technical Analysis

Dollar/Swiss continued drifting lower, and then it accelerated, with a sharp drop that stopped only at 0.7067. The pair then recovered impressively before struggling at around 0.77 (mentioned last week).

Technical lines, from top to bottom:

The already ancient all time low  of 0.8275 proved to be a strong line of resistance after it was broken, and before the collapse. It is followed by 0.82, which managed to cap a recovery attempt recently, and worked as a pivotal line . This round number is minor now.

0.8130 is a minor line below. We’ve seen it work perfectly well as support, serving as the bottom border of the range before the last drop. The previous record low of 0.8075 is now resistance, quite a minor one.

The round number of 0.80 continues to be of high importance. After it was lost, the pair never looked back. Minor resistance is at 0.7925, a place of hesitation after the break.

0.7850 worked perfectly well as resistance a few weeks ago, after being support beforehand. 0.78 proved to be a line of resistance after the dive lower. The pair got close to this line before recovering.

0.77 is another round number and a pivotal line. It’s importance is greater now – the pair struggled around this line that slowed down its recovery. 0.7625 was a place where the pair found support. It is of minor importance now.

The previous all time low of 0.7575 is worked again as support after the recovery. It was an all time low very recently. It is followed by the round number of 0.75, which is only minor support.

0.7330 provided some support on the way down and later capped the pair before the great recovery. Further below, 0.7250 is another line of support, followed by 0.72.

The new all time low of 0.7067is the final frontier before the next big round number of 0.7000.

I turn from bearish to neutral on USD/CHF.

The panic in the markets seems to be behind us now, and the Swiss authorities proved that they can do something to stop the fall. There are doubts if they can really weaken the still overvalued Swiss franc, but at least they can keep it from further falling.

Further reading: