The Swiss franc strengthened, as USD/CHF dropped close to one cent on the week, closing at 0.9477. The upcoming week has four releases, including Retail Sales and CPI. Here is an outlook for the Swiss events, and an updated technical analysis for USD/CHF.
The surprising announcement at the end of the EU Summit of concrete measures to combat the debt crisis pushed up the swissie against the greenback. As well, Friday’s KOF Economic Barometer posted a strong reading.
Updates: Swiss releases looked very sharp to start off the trading week. Retail Sales, a key indicator, shot up 6.2%, its best performance since last August. The figure easily exceeded the market estimate of 2.1%. The SVME PMI improved to 48.1 points. This was well above the market forecast of 44.8 points. The strong data did not help the swissie, which crossed above the 0.95 line on Monday, as USD/CHF was trading at 0.9519. Market uncertainty over the situation in the Euro-zone pushed the dollar slightly higher against the Swiss franc. USD/CHF was trading at 0.9544. The Swiss franc continues to trade in a narrow range, with market uncertainty over a possible rate cut by the ECB on Thursday. USD/CHF was trading at 0.9560. The markets are watching for the release of two key indicators on Friday, CPI and Foreign Currency Reserves. The Swiss franc was down, as the pair crossed the 0.96 line, trading at 0.9602.
Retail Sales: Monday, 7:15. This key indicator has been in positive territory throughout 2012, with several strong readings during that time. The markets are predicting a modest 0.9% increase for the June reading.
SVME PMI: Monday, 7:30. This index has spent most of 2012 below the 50 point level, indicating industry contraction. The market forecast for the June reading stands at 44.6 points.
Foreign Currency Reserves: Friday, 7:00. In May. Foreign Currency Reserves were well above the market estimate, posting a reading of 303.8 billion. This indicator provides analysts with important data concerning the central bank’s currency market operations and policy.
CPI: Friday, 7:15. This key inflation index has bee on a downswing, recording a flat 0.0% reading in the June release. The markets are forecasting a contraction of 0.3% this month, which would indicate a decrease in economic activity. Will the index remain in positive territory in the July reading?
*All times are GMT
USD/CHF Technical Analysis
USD/CHF opened the week at 0.9579, and rose most of the week, reaching a high of a high of 0.9679, as the resistance line of 0.9719 (discussed last week) held firm. The pair then dropped sharply, falling to a low of 0.9463. USD/CHF closed the week at 0.9477.
Technical lines from top to bottom:
We begin above the parity line, with resistance at 1.0066. This line has not been tested since November 2010. This is followed by parity, which continues to be a strong line of resistance. Next, there is resistance at 0.9915. Below, there is resistance at 0.9783, which has not been tested since last January.
This is followed by resistance at 0.9719, which held steady as the dollar showed some strength and improved during most of the week. The next line of resistance is at 0.9584, which has strengthened as the pair trades at lower levels.
The pair broke through support at 0.9510 as the swissie improved sharply at the end of the week. This line is now providing weak resistance, and could be tested further if the dollar rebounds. The next support level is at 0.9412. Below, there is strong support at 0.9317, which has held firm since May. This is followed by support at 0.9250.
Close by, 0.9204 is protecting the 0.92 line. Below, is the round figure of 0.91, which the pair repeatedly tested in April. The final support line for now is 0.9053, which was last breached in May, when the dollar started a strong, sustained rally against the Swiss franc.
I am bearish on USD/CHF.
For the most part, Swiss economic data has not impressed, as the Swiss economy continues to struggle. The EU Summit provided the franc with a brief boost, but investors will likely continue to favor the safe haven currencies, such as the yen or dollar.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- 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 the Swiss Franc, see the USD/CHF forecast.
- USD/CAD (loonie), check out the Canadian dollar forecast.