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Thursday, 18 Aug 2011

SNB Fails to Act; CHF Rising

The Swiss franc (CHF) was seen trading with largely bullish results yesterday as traders moved away from riskier assets worldwide. The move came after the Swiss National Bank (SNB) delivered a dovish statement that failed to peg the currency to any regional neighbors, nor set a price floor on its skyrocketing value. Traders took cue from the SNB announcement and made a heavy push into the Swissie in yesterday's early trading hours.

Daily Trendnoupdowndownnono
Weekly Trendupupdowndownupup
1.44501.6550 78.500.8080 1.05900.8880
1.3945 1.60900.97000.8610

Economic News

USD - USD Moderately Lower as CHF Climbs

The US dollar (USD) was seen trading moderately lower at yesterday's close after a day of mixed news from the global economy. Weak gains seen on the USD this week was offset yesterday after the Swiss National Bank (SNB) failed to halt the rising strength of the franc (CHF). So far, this action has pushed investors back into the value of the Swissie, sapping safe-haven appeal from the greenback.

Economic news over the last few weeks has pushed traders into a position of market pessimism; and trading yesterday behaved more so than many analysts had anticipated. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing the remainder of August news to determine what the third quarter may bring.

With a very heavy news day expected from the US today, traders will want to be on guard against added volatility as today's news may generate some swings in value. Following yesterday's better-than-expected PPI growth figures, today's data should help generate some volatility as investors assess CPI, manufacturing, and home sales. As the trend persists, any additional negativity in today's news will likely spark heavier aversion from risk. Where the CHF stands in this fight could be the deciding factor in how much the USD gains as a result.

CHF - Swiss Franc Rallies as SNB Fails to Stem Momentum

The Swiss franc (CHF) was seen trading with largely bullish results yesterday as traders moved away from riskier assets worldwide. The move came after the Swiss National Bank (SNB) delivered a dovish statement that failed to peg the currency to any regional neighbors, nor set a price floor on its skyrocketing value. Traders took cue from the SNB announcement and made a heavy push into the Swissie in yesterday's early trading hours.

The largely bearish reports out of Europe yesterday have appeared to confirm many fears felt by traders who were anticipating a string of pessimism. Debt concerns remain a priority in the euro zone's periphery, and the holiday season in Europe is generating significant uncertainty as European leaders take leave amid a tremendous crisis. Such moves are acting solely as a fuel to the fire lit beneath the CHF, assisting its meteoric rise.

On tap today, traders will witness the release of a less a string of news out of the United States, with zero data arriving from Switzerland or the euro zone. Many analysts are now looking to Germany to shore up much of the euro zone's economic strength, with added responsibility falling to one of the few nations which has experienced very little economic distress. Should today's reports show additional weakness in the US, there is a good chance traders will purchase more francs.

JPY - With No BOJ Intervention in Sight, JPY Continues Rise

The Japanese yen (JPY) was given a boost yesterday, as market reports showed further flight to safety. Piling atop recent reports on Japan's shrinking household spending figures, the publication of Japanese trade data has shown a decline in exports consistent with an overly strengthened yen. Despite a meeting between French and German ministers over economic cooperation, the Pacific nations appear to be rushing ahead with their bullish endeavors, contrary to market outlook among the European nations.

Japan's economy has been much worse in its performance than it was expected to be just one month ago. Investors have been piling into the JPY en masse as its strength as a store of value gained appeal. As housing slumps, and as monetary adjustments take place in China and New Zealand, the Japanese and Swiss economies now finds themselves gaining the most from the blows coming down on Europe. Should this bombardment continue, the JPY will likely remain in its current bullish channel.

Oil - Crude Prices Continue Lower

Crude Oil prices fell mildly lower Wednesday as the downgrade of US debt by S&P last week pulled demand for oil significantly lower. Data releases out of Europe and the US last week are also driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

The impact has been a decline in oil values from over $100 a barrel a few weeks back to a current price near $85 a barrel. An expected jump in dollar values due to this week's risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains not materializing, sentiment appears to have the price of crude oil holding steady, with gradual losses priced in. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by week's end.

Technical News


Despite the increased volatility the EUR/USD continues to trade in a defined range between 1.4400 and 1.4050. Falling monthly stochastics suggest any approaches to the 1.4400-1.4500 levels may be sold into. Initial resistance comes in at last week's high of 1.4400 followed by the falling resistance line from the May high at 1.4450. A close above 1.4700 would signal an end to the range trading environment. To the downside support is found at 1.4050 followed by the 200-day moving average at 1.3945 and the rising trend line from June 2010 at 1.3875.


Last week's declines found support near the previously broken trend line from the April high and the pair looks to move higher. Resistance comes in at 1.6475; a level sterling has failed to breach three times. A move above here and the technical picture would likely turn bullish with further resistance at 1.6550 and 1.6745. The 200-day moving average at 1.6090 could keep any declines in check with further support at 1.6000 and 1.5935.


The yen has made two attempts to break through the all-time low that was set in mid-March near 76.25. Rising stochastics on the daily and weekly charts point to potential gains in the pair but short term momentum studies look to have more room to fall before the pressure is relieved. Therefore, a break of 76.25 is favored. After this level there is a lack of support on the monthly chart. To the upside initial resistance is found at last week's high of 78.50 followed by the post intervention high of 80.20.


In an amazing run the USD/CHF has gone from a complete free-fall to trade above its 20-day moving average, a level the pair has not seen since early July. After gapping above its initial resistance at 0.7800 the pair could run into resistance at 0.8080 which is also near the 38% retracement from the February high, followed by the trend line that falls off of the February high at 0.8200. This may provide traders better reentry levels into the long term downtrend of the pair. A further resistance level is found out at 0.8550.

The Wild Card


Since completing approximately a 61% Fibonacci retracement of the late June to early August move silver prices have risen 5 out of the last 7 trading days to trade above the $40 level. Forex traders should note the next resistance level for the commodity stands at $42.25 followed by $44.50. Support comes in at $38.60 and $37.00.

Current Time: 11/26 12:04 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
12:00EUR+ GfK German Consumer Climate9.49.2-1
13:30CAD+ Corporate Profitsq/q12.9%--1
23:30JPY+ Household Spendingy/y-0.4%0.0%-3
23:30JPY+ Tokyo Core CPI y/y-0.2%-0.1%-3
23:30JPY+ National Core CPI y/y-0.1%-0.1%-1
23:30JPY+ Unemployment Rate3.4%3.4%-1
00:05GBP+ GfK Consumer Confidence22-1
07:00EUR+ German Import Pricesm/m-0.7%-0.1%-1
07:01GBP+ Nationwide HPIm/m0.6%--1
07:45EUR+ French Consumer Spending m/m0.0%0.2%1
08:00EUR+ Spanish Flash CPIy/y-0.7%-0.5%-3
09:30GBP+ Second Estimate GDP0.5%0.5%-5
09:30GBP+ Prelim Business Investment q/q1.6%1.5%-3
09:30GBP+ Index of Services 3m/3m0.9%0.8%-1
09:31EUR+ Italian 10-y Bond Auction1.48|1.7--1
09:31USD+ ECB President Draghi Speaks---1
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