Forex - USD/CHF weekly outlook: August 15 - 19

Shutterstock photo

Shutterstock photo

Forexpros - Last week saw the Swiss franc fall to a six-day low against the U.S. dollar on Friday, extending sharp losses from the previous session amid speculation the Swiss National Bank will take further action to weaken the currency.

USD/CHF hit 0.7785 on Friday, the highest since August 4; the pair subsequently consolidated at 0.7775 by close of trade on Friday, climbing 2.37% over the week.

The pair is likely to find support at 0.7236, Thursday's low and short-term resistance at 0.7855, the high of August 2.

The Swiss franc plunged nearly 4.6% against the greenback on Thursday, the biggest one-day drop since 1990, while the euro jumped by almost 5%, the most since its inception in 1999.

The Swissie weakened after SNB Vice President Thomas Jordan said Thursday that the central bank could further ease monetary policy without having to intervene in the currency market to curb the franc's recent gains.

Jordan added that a temporary tie between the Swiss franc and the euro would be legal under the SNB's mandate, as long as such a peg contributed to price stability.

Meanwhile, SNB officials declined to comment on speculation that Swiss lenders might start charging 1% on franc deposits from as early as next week.

On Wednesday, the SNB announced that it would take additional measures, including increasing liquidity to the money market and conducting foreign exchange swap transactions to curb recent gains in the currency.

The actions come after the SNB narrowed its three-month Libor rate to 0.25% from 0.75% on August 3, saying the currency was "massively overvalued".

The franc climbed to a record high of 0.7066 against the greenback on Tuesday, after the Federal Reserve pledged to keep its benchmark interest rate at an all-time low until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

On Monday, market sentiment was rattled after ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed last Friday.

The ratings agency kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

The downgrade prompted investors to shun riskier assets, such as stocks and higher yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.

Looking ahead to the coming week, U.S. data on consumer price inflation will be a major focus of attention, while Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy will also be in focus.

Ahead of the coming week, Forex Pros 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

Monday, August 15

Switzerland is to release government data on producer price inflation, a leading indicator of consumer price inflation.

Later in the day, the U.S. is to produce official data on manufacturing activity in New York State and a report on the balance of domestic and foreign investment in the U.S.

Tuesday, August 16

The U.S. is to publish official data on building permits, an excellent gage of future construction activity, as well as data on housing starts. The U.S. is also to release data on import prices, the capacity utilization rate and industrial production, a leading indicator of economic health.

Wednesday, August 17

The U.S. is to publish official data on producer price inflation, a leading indicator of consumer inflation, as well as government data on crude oil stockpiles.

Thursday, August 18

The U.S. is to publish a flurry of economic data with government reports on initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles.

Forex News

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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