The Swiss franc finally took a break from its gains. The upcoming week is rather busy, with the quarterly rate decision being the highlight. Here’s an outlook for the Swiss events and an updated technical analysis for USD/CHF.
One of the factors that weakened the franc was a factor that pushed it higher: the price of oil, which leaned downwards, especially after the Saudi decision to ignore OPEC’s decision and raise production.
USD/CHF daily chart with support and resistance lines marked. Click to enlarge:
- SECO Economic Forecasts: Tuesday, 5:45. This quarterly report is of high importance, as it provides a wide overview of the economy, and is provided by an official source. Forecasts will likely be optimistic now.
- PPI: Wednesday, 7:15. Producer prices made an upwards in March, but then eased again, with a rise of 0.3% in April. Another slowdown is expected now, especially due to the drop in commodity prices in May, a rise of only 0.2%.
- Industrial Production: Thursday, 7:15. After three consecutive quarters of solid growth in industrial production, with an especially strong rise in Q4, a drop of 7.5% is expected now in Q1. Note that a similar fall was seen in Q1 2010.
- Rate decision: Thursday, 7:30. The Swiss National Bank is expected to leave the Libor Rate unchanged at 0.25% for another quarter. While a rise in inflation has been seen, it wasn’t too strong, and was pressured downwards by the high value of the franc. Regarding the currency, the SNB has followed such rate decision with interventions to weaken the currency in some cases. While the SNB isn’t happy with the strength of the franc, an intervention isn’t likely now, especially as these interventions have proved inefficient.
* All times are GMT.
USD/CHF Technical Analysis
At the beginning of the week, Dollar/Swiss challenged the all-time low reached last week. But later, the pair began rising, and bounced off the previous all time low of 0.8463 (mentioned last week).
Technical lines, from top to bottom:
We start from 0.9370, which was a stubborn peak at the beginning of March. Below, 0.92, an excellent cushion at the same period of time is resistance.
Minor resistance is found at 0.9125 after working as minor support earlier this year. The round number of 0.90 worked well in both directions, especially as resistance, capping recovery attempts by the pair.
Another major line is 0.89. This was a double bottom, and was an all time low for around one month, until lower levels were reached. 0.8780 was a swing low and capped the pair. This line is further away now.
0.8625 was the previous trough and now works as minor resistance, switching positions from two weeks ago. The older all-time low of 0.8553 is still of high importance.
The next line is previous all time low of 0.8463 which worked as an excellent line of resistance just now. The new all time area of 0.8330 worked as support just now, and continues to have the same role. Far below, we have the round number of 0.80, but it’s very far.
I am bullish on USD/CHF.
The strength of the Swiss franc, that enjoys the safe haven status, has reached a level that endangers the economy. There’s more room for a weaker franc, and a stronger USD/CHF.
For another technical view of the franc, see the Elliott Wave Video Analysis.
Further reading:
- 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
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