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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.

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

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Further reading:

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