EUR/CHF Forecast Dec. 19, 2011, Fundamental Analysis

The EUR/CHF ended last week bearishly and the franc extended the gains after the SNB left the floor for the pair at 1.20 and refrained from action with also steady LIBOR rates near zero.

Investors were betting the bank will move soon and with again promises to take action the pair lost its upside momentum especially as expectations were for 1.25 new floor for the pair and now instead the bank decided to wait and see despite the growing signs of slowdown and rising deflation threats.

This week the focus will shift to the end of the year trading as this week is the last before the holiday infamous for low volume and tight ranged trading. The sentiment will start to shape as investors stay aside ahead of the start of the coming year and closely eye developments from the euro area.

On Monday we need to focus on the French auction for sure for signs of demand slowing or rising yields that keeps nation the center of market focus as rating agencies still has its top credit rating under the line of fire that if seen will have drastic and negative consequences on the sentiment and on the market.

The euro area will start the week at 09:00 GMT with the Current Account for October where the deficit might have widened from the previous 0.5 billion after we saw the trade surplus on Friday shrink to 0.3 billion from the previous 2.1 billion euros.

Construction Output for October is due at 10:00 GMT and unlikely to have improved drastically after the previous drop of 1.3%.