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Swiss Franc Could Gain On Technical Factors This Week

Friday, 03 October 2008 23:22:44 GMT

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Written by Terri Belkas, Currency Strategist

The Swiss franc plunged against the US dollar and Japanese yen over the past week, but showed surprising resilience against other currencies like the Australian dollar, euro, and Canadian dollar. Indeed, as we see so often, the fundamentals of Switzerland do not tend to play a huge role in trading of the franc.

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Swiss Franc Could Gain On Technical Factors This Week
 
Fundamental Outlook for Swiss Franc: Bullish
 
-          Swiss CPI holds at 2.9%, suggesting inflation growth may have peaked
-          Swissie had fallen sharply, will the move continue: US Dollar/Swiss Franc Exchange Rate Forecast
 
The Swiss franc plunged against the US dollar and Japanese yen over the past week, but showed surprising resilience against other currencies like the Australian dollar, euro, and Canadian dollar. Indeed, as we see so often, the fundamentals of Switzerland do not tend to play a huge role in trading of the franc. Instead, its low-yielding status (Swiss central bank rates are at 2.75 percent) leads it to gain during times of market uncertainty. However, with the US dollar and Japanese yen associated with even lower interest rates (2.00 percent in the US and 0.50 percent in Japan), those currencies will tend to benefit the most from bouts of risk aversion.

Looking ahead to this week, there is very little event risk on hand with only the Swiss unemployment rate scheduled to be released. This figure is forecasted to hold steady at 2.4 percent, which is relatively low, but there is some danger that this will unexpectedly rise. Though the Swiss economy appears to be grappling with the global slowdown better than its European neighbors, they may not be completely immune given their reliance on exports. From a technical perspective, there’s limited upside potential for USD/CHF. Looking at the monthly charts, there is a key trendline that was former support, and now serves as resistance near 1.14. As a result, as long as price holds below this level and if we see broad US dollar losses this week, USD/CHF could pull back.
 

Visit our recently updated USD/CHF Currency Room for more resources dedicated to the franc.

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