EUR/CHF Forecast Dec. 16, 2011, Fundamental Analysis

The EUR/CHF moved to the downside in a strong move compared to the previous period after the SNB confirmed rates at the 0.0-0.25% LIBOR range and as close to zero and also held the cap on the EUR/CHF at 1.20 which unwound expectations for a move now from the SNB.

Despite the weakening growth figures and rising deflation threats the SNB opted to wait till the beginning of the year to take action to see the outcome of the European crisis. Although the bank insured that it is ready to support the economy and fight deflation yet it was not a change in the tone to reflect an eminent move and diluted expectations for anything soon which supported the franc to win grounds against the euro.

On Friday the volatility will remain and we still see the franc enjoying some bias for gains now after the SNB disappointed expectations for a move yet the pair will soon return to its dull state and tight trading ranges in the coming days.

The euro zone will end the week with the October trade figures at 10:00 GMT and we are unlikely to witness any improvement from the seasonally adjusted surplus in September of 2.1 billion euros as global trade continued to be fragile.