The Week Ahead: USDCHF
USD/CHF weekly outlook: May 5 - 9
The U.S. dollar ended Friday’s session lower against the Swiss franc after briefly rising when the latest U.S. jobs showed that the unemployment rate dropped to a more than five year low last month but also pointed to weaker earnings growth and a drop in labor force participation.
USD/CHF initially rose to session highs of 0.8842 before falling back to settle at 0.8779 at the close, down 0.14%. For the week, the pair lost 0.27%.
The pair is likely to find support at 0.8740 and resistance at 0.8825.
The Labor Department reported Friday that the U.S. economy added 288,000 jobs in April, well above expectations for jobs growth of 210,000. The U.S. unemployment rate dropped to a five and a half year low of 6.3%, compared to expectations for 6.6%.
The report also showed that the labor force participation rate, which measures the proportion of people either working or looking for work, fell to 62.8% from 63.2% in March. Meanwhile, average wage growth edged down in April from the same month a year earlier, dampening the medium term inflation outlook.
Earlier in the week, preliminary data showed that U.S. gross domestic product grew at an annual rate of just 0.1% in the first three months of the year, well below forecasts for an expansion of 1.2%.
Despite the sharp slowdown in growth the Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month. The Fed also said interest rates would remain on hold at record lows for a "considerable time" after the bond-buying program ends later this year.
The U.S. central bank acknowledged that first quarter growth was far weaker than expected, but added that growth had started to pick up in recent weeks.
In the week ahead, investors will be looking ahead to Monday’s report on U.S. service sector activity and Wednesday’s testimony by Fed Chair Janet Yellen on monetary policy and the economy.
Meanwhile, the Swiss National Bank is to release data on foreign currency reserves.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday as there are no relevant events on this day.
USD/CHF weekly outlook: June 23 - 27
The dollar pushed higher against the Swiss franc on Friday, trimming the week’s losses after the Federal Reserve signaled that interest rates will remain low for a considerable time after the bank’s asset purchase program ends.
USD/CHF eased up 0.12% to 0.8949 late Friday, paring the week’s losses to 0.58%.
The pair is likely to find support at 0.8909, Thursday’s low and resistance at 0.8998, Wednesday’s high.
The greenback weakened broadly after the Fed gave no indication of when interest rates could start to rise at the conclusion of its two-day meeting on Wednesday. In addition, the Fed’s forecast of where interest rates might reach in the long term fell from 4% to 3.75%.
The central bank cut its bond purchases by $10 billion a month, to $35 billion, saying there was "sufficient underlying strength" in the U.S. economy to continue tapering.
Despite this, the Fed lowered its forecast for growth this year to a range of 2.1% to 2.3% from 2.8 to 3.0% previously, due to "unexpected contractions" in the first quarter as a result of the unusually harsh winter.
The Fed acknowledged the recent increases in inflation and drop in unemployment, but Chair Janet Yellen said no formula was in place for when interest rates would start to rise.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, edged up to 80.41 late Friday from lows of 80.24 on Thursday. For the week, the index lost almost 0.3%.
The Swiss National Bank kept its benchmark interest rate unchanged close to zero on Thursday and reaffirmed its commitment to the minimum exchange rate of CHF1.20 per euro.
The accompanying rate statement released after the announcement said the Swiss franc is “still high.”
The SNB said it would continue to enforce the minimum exchange rate of 1.20 per euro with the utmost determination and reiterated that it is prepared to purchase foreign currency in “unlimited quantities” and take further measures if required.
In the coming week, the U.S. is to release data on consumer confidence, durable goods orders and home sales, while Switzerland is set to release its latest trade data.
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USDCHF: With continued weakness seeing USDCHF testing a low of 0.8776 before closing lower at the 0.8801 level on Friday, further decline remains intact. It requires a break and close below the 0.8798 level, its Dec 27 2013 low and the 0.8776 level, its past week low to decline further. Further down, support lies at the 0.8750 level with a cut through here paving the way for a run at the 0.8700 level, its big psycho level. Below here if seen will set the stage for more weakness towards the 0.8650 level. Its weekly RSI is bearish and pointing lower supporting this view. Conversely, to reduce its downside pressure it will have to return to the 0.8929 level followed by its resistance residing at the 0.9037 level. This if seen could force further upside towards 0.9081 levels followed by the 0.9156 level, its Jan 21 2014 high. Further out, resistance resides at the 0.9200 level, its psycho. All in all, the pair remains biased to the downside in the medium term.