USD/CHF Outlook July 2-6

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.

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

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

Further reading:

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.