USD/CHF Outlook – August 8-12

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The Swiss franc is having a one sided summer, thanks to the global slowdown. The upcoming week consists of three events. Here is an outlook for these events, and an updated technical analysis for USD/CHF.

Even a sophisticated intervention attempt by the SNB was short lived, and failed to stop the franc. The debt crisis in the old continent and the debt ceiling issues in the US meant a stronger Swiss franc across the board, with fresh records against both major currencies. Where will this stop?

USD/CHF daily chart with support and resistance lines marked. Click to enlarge:USD CHF Chart August 8 12 2011

  1. Unemployment Rate: Monday, 5:45.  Switzerland has an unemployment rate that is of envy to many countries. An amazing rate of 3% was recorded in the past two months. A small rise is expected now, but not something that will endanger the franc.
  2. SECO Consumer Climate: Tuesday, 5:45. This 1100 strong consumer climate indicator tends to rock the Swiss franc. After four consecutive months of positive scores, this index dropped to negative territory at -1 points, meaning slight pessimism. A rise back to low positive territory is expected now.
  3. PPI: Thursday, 7:15. The high value of the Swiss franc means that import prices are cheaper, and this lowers the PPI. The past two months have seen drops in producer prices, with a big 0.5% drop last time, more than expected. Another drop is likely now.

* All times are GMT.

USD/CHF Technical Analysis

The Swiss franc began the week with fresh gains against the greenback, with 0.7850 (mentioned last week) switching positions quickly to resistance.  USD/CHF continued lower, with a new record low of 0.7575.

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, it was lost for the pair. Minor resistance is at 0.7925, a place of hesitation after the break.

0.7850 worked perfectly well as resistance just now, after being support beforehand. 0.78 proved to be a line of resistance after the dive lower.

0.77 is another round number and a pivotal line, though quite minor. A more important line to note is 0.7625 – the pair found support there more than once.

The new all time low of 0.7575 is the final frontier in charted territory. In uncharted territory, the round number of 75 is awaiting the pair, followed by 0.7425 and 0.7350. Reaching 0.70 is also possible due to the extreme circumstances.

I am bearish on USD/CHF.

The downgrade of the US credit rating by S&P is likely to send USD/CHF way down – the ultimate safe haven currency is set to be a big winner from the event.

For the longer run: the intervention attempt by the SNB isn’t likely to push the pair up, although its excessive strength will eventually lead to a rise in the long run. For now, the moves in the Swiss franc depend on the global mood, especially in Europe. It Trichet continues providing half-hearted solutions, the pair can fall even more.

Further reading:

Get the 5 most predictable currency pairs

About Author

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 the 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.

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