EUR/CHF Weekly Forecast December 19-23, 2011, Fundamental Analysis

The EUR/CHF ended with bearishness as the franc gained ground once again after the SNB did not make any move this month and opted to leave rates and the franc cap unchanged.

The pair moved to the downside after the SNB withheld the wait and see approach to eye the developments in the euro area and how much damage it will reflect on the Swiss economy that is already feeling the pressure.

Growth is slowing in Switzerland and deflation threats are rising and that is keeping the franc under a close watch for any move from the SNB that reiterated its commitment to support growth and fight deflation.

This week we still expect the pair to return to its tight range trading as the effect of the SNB action dims and deprive the pair of upside momentum and clearly the defense is seen and will prevent the pair from downside movement.

The debt crisis will remain center stage and the lack of major data deprives the pair of momentum which will likely remain biased sideways in a tight range this week especially as this is the last week before Christmas and the start of the end of the year thin trading volumes.

Other news from the euro area and the Swiss economy to affect the pair this week:

Monday December 19:

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%.

Tuesday December 20:

At 07:00 GMT, the Swiss economy will release its most important data for the week which is trade data for Nov. with exports and imports during the month. The trade surplus is predicted to narrow to 2.00 billion Swiss francs from the prior surplus of 2.15 billion francs.

Germany will release the Gfk Consumer Confidence Survey for January at 07:00 GMT which is expected to slow slightly to 5.5 from 5.6.

Also at 07:00 GMT we have the Producer Price Index from Germany which is expected with 0.1% gain in November after 0.2% and on the year to ease to 5.2% after 5.3%.

At 09:00 GMT we have the IFO survey for December were the Business Climate index is expected to fall to 106.0 from 106.6, the Current Assessment index to fall to 116.0 from 116.7 and the Expectations index to fall to 97.0 from 97.3.

Wednesday December 21:

The Swiss Money Supply M3 for the year ending November is due at 08:00 GMT and likely did not change heavily from the previous 8.2%.

Thursday December 22:

Both economies lack economic fundamentals and the pair is expected to continue trading within its tight range.

Friday December 23:

Both economies lack economic fundamentals and the pair is expected to continue trading within its tight range.