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The Swiss franc showed little movement against the dollar this week,   closing at 0.9364, virtually unchanged from the week’s opening.  The upcoming week  is very  quiet, with only two  important indicators. Here is an outlook for the Swiss events, and an updated technical analysis for USD/CHF.

The SNB did not have  any  gifts  for the markets, forecasting weak economic growth of 0.5% for 2012 and   expressing concerns about deflation if the Swiss franc does not depreciate. This may well force the central bank to raise the EUR/CHF of 1.20 in order to push the CHF lower.

Updates: Dollar/Swiss made a small drop to 0.9325, helped by a good Italian bond auction. All in all, movements remain limited.

USD/CHF daily graph with support and resistance lines on it. Click to enlarge:

  1. UBS Consumption Indicator: Tuesday, 7:00. The consumer index has been on a modest  upward trend since September, climbing to 0.91 in November. However, this is well below the index’s readings earlier in 2011, which hit a high of 1.91 in  June. A December  figure above the important 1.0 level would indicate modest economic growth and would be bullish for the swissie.
  2. KOF Economic Barometer: Wednesday, 10:30. This important index is  composed of 12 eonomic indicators, and provides a snapshot of where the economy is headed for the next six months. Unlike  the UBS Consumption indicator, the KOF  Economic index is painting a gloomy picture, as it has been on a downtrend for six consecutive months, dropping from 2.30 in May, and plummeting to an alarming 0.35 in November.  This is the lowest reading since 2009, at the height of the global financial meltdown.

The December forecast  calls for a further drop to 0.25. If the index does indeed drop again this month, it will  be a dismal end to the year, and is bound to hurt the Swiss franc.

*All times are GMT.

USD/CHF Technical Analysis

Dollar/Swiss  showed little movement this week, with some slight pressure on the dollar. The pair opened the week at 0.9362. It managed to breach 0.9370, (discussed last week), and reached the round figure of  0.94.  The pair then  dropped to 0.9241, before recovering to close at 0.9364.

Technical lines from top to bottom:

We start with the resitance level of 0.9780, which was last tested by the pair in February. Next is a resistance line at 0.9636, followed by strong resistance  levels at  0.9540 and 0.9479. The round figure of 0.94 was touched this week, and will be  tested on any upwards move.  0.9340 is now in a role of weak support, followed by the line of 0.9210.

0.9085, which was a strong support level in mid-October, is  now  a  support  level for the pair.  The round number of 0.90 is  the next  important support level. 0.89, which acted as strong resistance in mid- 2011, in now providing strong support. The  final support lines for now  are 0.8640,  and the round level of .8600.

 I am  bullish on USD/CHF.

Economic indicators, such as the  well-respected KOF Economic Barometer, paint a picture of an economy headed in the wrong direction, and analysts are predicting that the Swiss economy will dip into a recession sometime next year. The US economy appears to be improving, and the dollar has been  on the upswing  against most major currencies.

Further reading: