Swiss franc news - page 16
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USD/CHF Continues To Tackle Resistance
Wider dollar support, allied with a decline in defensive franc demand and a widening of yield spreads, has boosted USD/CHF with markets looking to target parity over the next few days.
The dollar has maintained a firm overall tone with the trade-weighted index breaking above the 97.00 level to the highest level since the second half of July and the immediate focus will be on highs that month just below 97.50.
The firm dollar tone has given important underlying support to USD/CHF with a move to fresh five-week highs around 0.9860 as EUR/USD retreated to test support just above the 1.1100 level.
Over the past 24 hours, there have been investment bank recommendations of buying the pair with a target of parity and this will inevitably be a key short-term focus, although resistance levels will still be tough to break down.
Rising global bond yields will tend to undermine potential defensive franc demand, especially given the Swiss yield structure. The National Bank is targeting the repo rate at -0.75%, which is the lowest rate among major economies.
The Swiss 10-year bond yield is still close to -0.50%, while equivalent German yields have moved back above the zero level and US yields have moved to four-month highs above 1.75%. There has, therefore, been a significant widening of yield spreads against the Swiss currency and this will be important in undermining near-term franc support.
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USD/CHF Makes Bullish Break of 10-Month Declining Trendline
USD/CHF broke above a declining trendline that dates back to highs from late November 2015. The bullish break has come as a result of broad-based strength in the Greenback and has signaled the potential for a broader turn in the pair following a 10-month downtrend.
The US Dollar scaled to seven-month highs today as the index (DXY) has been steadily bid since the open this week. DXY has broken above prior highs set in July at 95.57 and has made a sustained break above an important resistance zone between 97.19 and 97.35 on a 4-hour chart.
Several technical breaks have been seen in Dollar pairs as of late. EUR/USD has fallen below the lower bound of a rising channel that dates back to December lows. USD/SEK has broken above an 18-month flag pattern. USD/JPY has made a bullish push out of a 9-month declining channel, and GBP/USD broke below an important rising trendline last week, that has led to significant losses in the pair.
The US Dollar has largely been consolidating since last December, and recent talks of a near-term rate hike have gotten the markets bullish the Greenback once again, creating some potential for the broader uptrend seen in DXY from 2014 to resume once again.
In addition to the declining trendline break in USD/CHF, the pair now shows a clear succession of higher highs, and higher lows, from lows posted on August 18, as the pair has made a marginal high above the prior September 1 peak.
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USD/CHF Corrects From Two-Month Highs, US Retail Sales Due Friday
The dollar was unable to hold a move to fresh two-month highs above 0.9900 against the franc with a correction after the Federal Reserve minutes were slightly less hawkish than expected.
The dollar was unable to make any impression on resistance following the Federal Reserve minutes with the tone slightly less hawkish than expected given that a majority of committee members were content to wait, in the short term at least, before tightening. Overall, the Fed appearing to be on track for a December rate increase, but this has already been priced in and there was no further shift in Fed Funds futures. Overall USD/CHF hit resistance at two-month highs just above the 0.9900 level.
There was a slightly more defensive tone surrounding risk appetite following the latest Chinese trade data with significant concern surrounding the decline in exports in yuan terms for the first time in six months.
The Nikkei index lost ground on the day, while the DAX index lost over 1.0% early in the European session. The less benign risk conditions and a dip in equity markets provided some element of support to the Swiss currency, especially with renewed concerns surrounding the growth environment.
The US labour-market data maintained a strong tone with jobless claims at 246,000 in the latest week with the previous week’s figure revised down to 246,000 from the original-reported 249,000. These weekly figures are very close to the lowest level for over 40 years and will maintain confidence in the near-term employment outlook.
The overall market reaction was limited given expectations that there would not be any significant impact on interest-rate expectations.
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Switzerland PPI Sept mm +0.3% vs +0.1% exp
Swiss September PPI report 14 Oct
USD/CHF Weekly Forecast October 17-21
An important technical break was seen in USD/CHF this past week, as the pair broken above a 10-month declining trendline, suggesting that a broader recovery is taking place. In addition to the trendline break, the neckline of an inverse head and shoulder’s pattern has been breached with measured move targets residing at 1.0120.
The declining trendline connects late November highs with the January 29 daily close. The pair broke above the trendline on Monday while Tuesday’s price action served to activate the head and shoulder’s pattern. On a daily chart, the pattern can be seen developing from late July highs, with the neckline falling around 0.9830. The combination of technical patterns suggests the pair will be well bid in the upcoming week.
A significant build was seen in Swiss Franc positioning in the latest COT report. Non-commercials increased their net long position by $814 million in the week to October 11, for a total net long of $1.19 billion. The build arose mostly from short covering, while there was a marginal build in the long contracts.
Inflation data is scheduled for release out of the United States on Tuesday and is expected to improve further. Last month’s CPI data triggered a sharp rally in the Greenback, and this week’s data stands to trigger a continuation higher in USD/CHF in the event of a strong reading. CPI is expected to rise 0.3% in September against a rise of 0.2% in August. The core figure is expected to edge down to 0.2% against a rise of 0.3% in the prior month.
USD/CHF closed out the last week near highs, as the pair managed to make a sustained break above 0.9885, reflecting August 2015 highs. Further resistance is seen at 0.9948 referencing highs from May and July. The second level of resistance is seen at the psychological parity mark. To the downside, the neckline of the head and shoulder’s pattern offers strong support and is currently seen residing at 0.9830.
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USD/CHF: Triangle Breakout Points to Further Gains
USD/CHF is consolidating following last week’s 1.2% gain, currently trading at the 0.9891 level, down 0.03% from Friday’s close. The pair is overbought on both a daily and weekly basis according to the Stochastic, a price momentum oscillator. Thus, the consolidation could extend over the short term.
However, the U.S. calendar is busy this week, thus volatility in the dollar is possible, resulting in a breakout from the current consolidation. And, with last week’s decisive breakout from a symmetrical triangle shown on the weekly chart, the current bias is to the upside.
Near term resistance is at the recent high at 0.9913, followed by key resistance at the May/July rally highs at 0.9956/0.9950. A breakout above this level would be considered another bullish development for the pair that is likely to lead to further gains in the weeks ahead. The upside target derived from the symmetrical triangle calls for an eventual climb to the 2015 high at 1.0330.
On the downside, support is at Friday’s 0.98533 reaction low, followed by former resistance at the 0.98188 level, defining the mid-September corrective top. A decline to this level would fall short of retracing 38.2% of the advance from the September low, thereby qualifying as a minimal pullback that leaves the pair well-positioned to recover and resume the recent rally. And, with the intermediate term bias to the upside, such a decline would be viewed as a buying opportunity in anticipation of further gains in the weeks ahead.
The Swiss data calendar is light this week, with the only release being the September Trade Balance on Thursday. As already noted, however, the U.S. economic calendar is heavy with releases. The key data release in the U.S. is CPI for September, which is due out on Tuesday at 8:30am EST. Consensus estimate for Sept. CPI is 0.3%, while the Core CPI consensus forecast is at 0.2%. This will be a key metric in the Federal Reserve’s decision to raise rates before the end of the year. And, at present, the probabilities point toward a rate hike, as Fed Fund futures are indicating a 69.5% chance of a rate increase at the December meeting. On today’s calendar is another important data release, Industrial Production/Capacity Utilization, which is due out at 9:15am EST.
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CHF: SNB To Remain Active In FX Market: EUR/CHF En-Route To 1.12 In 6M
EUR/CHF has been trading in the 1.08-1.09 range over the summer as the SNB has capped CHF appreciation via FX interventions.
We expect the SNB to remain active in the FX market and still expect EUR/CHF to remain range bound in the coming months, targeting the cross at 1.09 in 1M and 3M.
Longer term, we continue to expect fundamentals to support a higher EUR/CHF and keep our 6M and 12M forecasts unchanged at 1.12 and 1.15, respectively.
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Switzerland trade balance Sept CHF +4.37bln vs +3.01bln prev
Swiss Sept trade balance report 20 Oct
USD/CHF At Risk Of SNB Intervention
The US Dollar drove the majors today, causing a spike low to fresh weekly lows in USD/CHF followed by a rally to weekly highs within the same session. The volatility came as a result of comments from Draghi at the ECB press conference.
Draghi’s reluctance to provide forward guidance on a potential QE extension triggered broad-based weakness in the Dollar in the early part of the press conference. He later dismissed earlier reports that the central bank had reached a consensus to start tapering their bond purchasing program, driving the Dollar sharply higher. Draghi’s comments drove initially drove USD/CHF higher and follow through was seen after the European close, in line with the broader uptrend in the pair.
The Swiss Franc will be closely watched at this point, as EUR/CHF is seen once again nearing the 1.0800 handle. While the Swiss National Bank has not officially set a floor for the Franc, there has been some speculation that the central bank has been defending the 1.0800 area in EUR/CHF. The pair had dropped below the handle during the EU referendum when the SNB publicly stated that they had intervened in the currency markets. Since then, a sharp rally higher has been seen from the level on an approach in July, August, and September. EUR/CHF reached a low of 1.0833 today prior to bouncing higher.
If the central bank intervenes once again the Swiss Franc stands to depreciate against all of its counterparts, as it had on previous occasions. The black swan event of January 2015 may have deterred some market participants from participating in moves related to the SNB, but as a floor has not officially been set, the risk that was present at that time is absent. Market participants may look to sell the Swiss Franc at these levels even if the SNB does not get involved.
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USD/CHF Weekly Forecast October 24-28
USD/CHF made a small advance in the past week for a fourth consecutive weekly gain. The pair traded in a range in the early week while Thursday’s ECB meeting introduced volatility as the pair posted both a fresh low and high for the week as a result of the meeting.
In the early part of the ECB meeting, comments from Draghi indicating the ECB had not discussed extending the bond purchasing program triggered a sharp move higher in the Euro and as a result a drastic move lower in the Dollar. USD/CHF hit a spike low of 0.9843 prior to turning higher. Draghi denied earlier reports that the central bank had come to a consensus to taper their bond purchase program. The rhetoric triggered a sharp reversal in USD/CHF, sending the pair to break above the weekly range.
Follow through was seen on Friday, however, the rally in the currency pair was lackluster with the Swiss Franc limiting losses as compared to the Euro.
EUR/CHF neared the 1.0800 handle on Friday to make a marginal break below prior lows posted in late September. Although the Swiss National Bank does not have an official floor in the exchange rate, there has been some speculation that the central bank has been defending the 1.0800 handle following the EU referendum. Since the UK vote, the pair has bounced higher from the area in July, August, and September.
Inflation data out of the United States failed to create a sustained trend in USD/CHF. The consumer price index was reported to rise 0.3% in September and 1.5% on an annual basis, both in line with expectations. The core figures came in slightly below the consensus with a monthly rise of 0.1% and an annual rise of 2.2%.
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