The Swiss franc continued its impressive rally against the dollar last week, closing just above the 0.91 level. The upcoming week has four releases. Here is an outlook for the Swiss events, and an updated technical analysis for USD/CHF.
The dollar continued to retreat, despite stronger US economic figures. The franc continues to roll, and the big question now is: will the dollar drop below the 0.90 level before a correction occurs?
Updates: Dollar/Swiss bounced off lows as the situation in Europe becomes worrying again, pushing the dollar higher. 0.9112 was the bottom, and 0.92 is approached once again now. EUR/CHF is too close to the 1.20 floor and sparks might be seen with this pair and with USD/CHF. Greek issues send the dollar higher, and the pair above 0.92 once again. The Swiss franc enjoys the signs of global stabilization and rises against the greenback. USD/CHF is around 0.9150. It’s important to watch EUR/CHF, which touched 1.2030 before rising a bit. A drop of the euro could send the pair to the “SNB line in the sand” of 1.20.
- UBS Consumption Indicator: Tuesday, 7:00. This composite index is based on economic indicators which include consumer confidence and consumer spending. These are critical for economic growth, and analysts review them carefully for any sign of a trend. The indicator dropped last month to 0.81, its second lowest reading since October 2009. A further drop could be a market-mover, and the franc may be adversely affected as a result.
Retail Sales: Wednesday, 8:15. This is one of the most important indicators of consumer spending. The indicator increased 1.8% in December, its first reading in positive territory since September 2011. Another increase would be welcome news for the fragile Swiss economy.
SVME PMI: Wednesday, 8:30. This indicator is based on a survey of 200 purchasing managers, who are asked to rate business conditions in Switzerland. The indicator rose above the 50 level for the first time since September, indicating growth in the purchasing sector.
Trade Balance: Thursday, 7:00. This is an important indicator for traders, since an increase in trade balance means that foreigners are purchasing more francs to buy Swiss goods. The indicator is on an upward trend, and reached 3.00B last month. This figure surpassed the market forecast of 2.47B. If the indicator agains can exceed the market prediction, this will be bullish for the franc.
USD/CHF Technical Analysis
USD/CHF continued its downward swing last week. The pair opened at 0.9371, and after touching 0.9375, dropped all the way to 0.9112, where it closed. The pair is now threatening the important support level of 0.90. (discussed last week).
Technical lines from top to bottom:
We begin with 0.9780, a strong resistance line, last tested by the pair in February. Below, is a resistance line at 0.9636. This is followed by 0.9510, which was tested earlier this month, and is providing stronger resistance as the franc rallies. Below, is the line of 0.9412, which earlier in the month was acting as support, and is now a weak resistance line. Next, is the weak line of 0.9306, which was easily breached this week by the pair. It is now in a resistance role. This is followed by 0.9250, which had been providing strong support since December, and is now providing the pair with resistance.
The line of 0.9165, which was severely tested in December 2011, is now providing weak resistance for the pair. Next, 0.9085, which was a strong support level in mid-October, could be tested by the pair on a further downswing. The psychologically important round figure of 0.90 is providing strong support for now. Next, 0.89 is a strong support level. This is followed by 0.8850, which was last tested in November and is providing important support. The final support line for now is 0.8768.
I am neutral on USD/CHF.
The franc has shown surprising strength in 2012, given the economic difficulties in the eurozone and the unresolved debt crisis. Traders should, however, keep in mind that USD/CHF was below the 0.90 as recently as November 2011, and the pair is only about 100 pips from this psychologically important level.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.