The Swiss Franc cam under pressure during the week as increasing risk appetitive saw the safe haven currency lose ground against most major currencies. After dipping to a low of 1.1242 the USD/CHF rose nearly 400 pips to a high of 1.1625. Early reports that U.S. banks fared well against the U.S. governments stress test and Wells Fargo posting better than expected earnings sent financials soaring.
Swiss Franc Could Remain Under Pressure As Optimism Increases
Fundamental Outlook for Swiss Franc: Bearish
- Swiss Headline Unemployment Remained Unchanged at 3.4%, But Rose To A Two Year High Of 3.3% Seasonally Adjusted
- Fundamental and Technical Analysis Point To Further Swiss Franc Weakness
The Swiss Franc cam under pressure during the week as increasing risk appetitive saw the safe haven currency lose ground against most major currencies. After dipping to a low of 1.1242 the USD/CHF rose nearly 400 pips to a high of 1.1625. Early reports that U.S. banks fared well against the U.S. governments stress test and Wells Fargo posting better than expected earnings sent financials soaring. Optimism has been building on the back of improving global fundamentals and increased efforts by developed nations to loosen credit markets. Fundamentally the country saw seasonally adjusted unemployment rise to 3.3% from 3.1%, which was a two year high. The lack of demand for exports continues to put pressure on employers to cut costs. However, the headline reading remaining at 3.4% versus expectations of an increase to 3.5% is an encouraging sign.
The USD/CHF broke above the 20,50 and 100-Day SMA’s during the week which leaves Bollinger band resistance at 1.1765 as the next barrier. However, the pair has yet to cleanly break above the 50-day SMA which could still cap further gains. Indeed, the actual results of the bank stress test are yet to be revealed and the uncertainty of the findings could lead to a reverse in risk sentiment and Swiss franc support. Yet, we must keep in mind that up until this past week the dollar has benefitted the most from risk aversion sentiment which makes predicting price action for the pair tricky. Nevertheless, the upside risk for the pair are the greatest as the Swiss National Bank has stayed firm to its commitment to see their currency weaken in an effort to help boost demand fro exports. The threat of intervention from the central bank will remain a weighing factor for the franc. Therefore, the economic docket will present little event risk as the currency continues to be dominated by the broader themes. Retail sales are expected to fall by 0.2% reversing the surprising gain from the month prior of 1.2%, which could only add to the bearish Franc sentiment. - JR
