Market Overview

USD/CHF Dec. 17 Quiet After Last week's Rally

USD/CHF is very quiet in Monday trading. The Swiss franc had a good week, flexing some muscle and gaining about 150 pips against the greenback. In a release late last week, the State Secretariat for Economics (SECO) said it was cautiously optimistic about prospects for the Swiss economy, but nevertheless lowered its forecast for growth for the economy from 1.4% to 1.3%.

There was tangible progress on the thorny debt crisis, with two important developments out of Brussels late last week. First, the Eurogroup agreed to release the second installment of bailout funds to Greece. Under the terms of the agreement, the EFSF (European Financial Stability Facility), will release a total amount of EUR 49.1 billion, which will be paid out in several parts.

Greece is slated to receive EUR 34.3 billion in the next few days, and the remaining funds by March 2013. Second, the Eurogroup signed a framework agreement whereby the ECB will become the single supervisor for the 200 largest banks in the Eurozone. The move aims to achieve closer financial integration and minimize the impact of future banking crises in the zone. Under the agreement, struggling banks would be able to receive emergency funds directly from the ESM (European Stability Mechanism), and would not have to request aid through their national governments. If all goes smoothly, the ECB will begin its new role as a “super bank commissioner” by January 2014. There have also been discussions of widening the ECB's supervisory powers to cover EU banks which are not located in the Euro-zone.

Back in the US, the dollar was broadly lower following the Federal Reserve's announcement that it would implement another round of quantitative easing (QE4), and purchase an additional 45 billion dollars per month in Treasury holdings in order to boost the US economy. Meanwhile, the gridlock over the fiscal cliff shows no sign in letting up. The Republicans have retreated on their demand not to raise taxes, but want a hike to only affect those earning more than $1 million. The Democrats are insisting on tax hikes over those earning over $250,000. The negotiations are continuing, and in the end, some compromise or stop-gap measure is likely to be reached before the end of the year.

There are only a few economic releases on Monday, so it could shape up to be a quiet day for the pair.

USD/CHF for Monday, Dec 17, 2012


USD/CHF Dec 17 at 11:55 GMT
0.9182 H: 0.9172 L: 0.9195

S3 S2 S1 R1 R2 R3
0.8930 0.9015 0.9130 0.9195 0.9275 0.9315

USD/CHF Technical
After a sustained downward push last week, USD/CHF is very steady in Monday trading. In the Asian session, the pair was steady, consolidated at 0.9185. The pair is unchanged in the European session. USD/CHF is close to the resistance at 0.9195, but this line is holding for now. The next resistance line is at 0.9275.On the downside, 0.9130 is the next support level.

OANDA's Open Position Ratios
USD/CHF bias remains strongly in favor of long positions. As we begin the new trading week , there is not sign of direction from the pair, which continues to trade in a narrow range. The swissie posted some gains against the dollar last week, so there is room for some retraction by the pair.

With only a few releases scheduled on Monday, we could see USD/CHF continue to drift with little movement in either direction. The markets are closely monitoring the fiscal cliff crisis, and any sign of progress could bolster the Swiss franc.

USD/CHF Fundamentals
• 13:30 US Empire State Manufacturing Index. Estimate -0.7 points.
• 14:00 US TIC Long-term Purchases. Estimate 24.3B.
• 16:00 US FOMC Member Jeremy Stein Speaks.
• 18:00 US FOMC Member Jeffrey Lacker Speaks.
*Key releases are highlighted in bold
*All release times are GMT

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