Market Overview

USD/CHF – Swiss Franc Continues to Rally

The Swiss franc continued to improve on yesterday's (Dec. 18) gains against the US dollar, and is testing the 0.91 level. USD/CHF as not dropped to these levels since April, as the broad weakness affecting the US dollar continues. The swissie took advantage of a strong release out of Germany on Wednesday, and a thumbs up from Standard & Poor's as it raised Greece's credit rating. The German Ifo Business Climate Index looked sharp, as it rose to 102.4 points, beating the market estimate of 101.9 points.

This was the indicator's best showing since July. Greece received the latest installment of bailout funds this week, and there was more good news for Athens as S&P raised Greece's credit rating by six levels, from “selective default” to “B minus”. Standard & Poor's had warm words for the recent measures taken by the Greek government, including significant spending cuts. The rating agency also praised the efforts of other Eurozone states to help Greece remain a member. These developments underscore that significant progress is being made in the Greek debt crisis, and such positive news out of Europe can further weaken the dollar and allow the Swiss franc to post additional gains.

In Washington, negotiations over the approaching fiscal cliff continue at an intensive pace between the Democrats and Republicans. Although there have not been any dramatic breakthroughs to report, the markets are cautiously optimistic that lawmakers on Capitol Hill will reach an agreement shortly. Polls indicate that most Americans blame the Republicans for the impasse and failure to resolve the crisis. The Republicans have responded by softening their positions and rhetoric, and are sounding more conciliatory. They have reluctantly agreed to tax hikes on the highest income earners, but the Democrats want these hikes to cover those earning more than $250,000. Other significant gaps remain between the two sides, especially with regard to the extent of spending cuts to Federal programs. With Q4 behind us, the markets are closely monitoring the progress in the talks. We could see USD/CHF improve if there is any progress, and retract if the negotiations seem to be stalled.

After a quiet start to the week, there are some important releases out of Europe and the US today. As mentioned, German Ifo Business Climate looked sharp. However, Euro-zone Current Account disappointed, falling well below the estimate. In the US, today's highlight is Building Permits.

USD/CHF for Wednesday, Dec 19, 2012

USD/CHF Dec 19 at 11:35 GMT
0.9104 H: 0.9128 L: 0.9099

USD/CHF Technical

S3 S2 S1 R1 R2 R3
0.8850 0.8930 0.9015 0.9130 0.9195 0.9275

 

In the Asian session, USD/CHF moved lower, and consolidated at 0.9115. The pair continues to move lower in the European session, and briefly broke below the 0.91 level. This line remains under pressure. The next significant line of resistance is at 0.9015. On the upside, 0.9130 has strengthened slightly as the pair trades closer to 0.91.

• Current range: 0.9015 to 0.9130
Further levels in both directions:
• Below: 0.9015, 0.8930, 0.8850, 0.8760 and 0.8635.
• Above: 0.9130, 0.9195, 0.9275, 0.9315 and 0.9450.

OANDA's Open Position Ratios
Trader sentiment is strongly in favor of long positions for USD/CHF, indicating optimism that the dollar will rebound after its recent losses against the franc. However, the dollar continues to look shaky as the swissie is testing the 0.91 level.

The Swiss franc continues to post gains against the dollar. Strong German data and an S&P upgrade to Greece have bolstered the franc, and we could see USD/CHF continue to drop.

USD/CHF Fundamentals

• 13:30 US Building Permits. Estimate 0.88M.
• 13:30 US Housing Starts. Estimate 0.87M.
• 15:30 US Crude Oil Inventories. Estimate -0.9M.
*Key releases are highlighted in bold
*All release times are GMT

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