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

On Monday, both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

Still, the main focus is on the latest developments from the euro area as many euro zone economies gird for bond selling this week.

Concerns from the euro area may remain after last week’s rise in Italian bond yields, downgrade by Fitch to large European lenders and weak growth outlook for the euro area gave bullishness to the pair as demand increased on the dollar as a refuge.

The Swiss franc has been damped as a safe haven, leaving this mission to the dollar and yen, especially after the Swiss National Bank (SNB) refused calls from exporters to raise the franc’s cap or push interest rate to negative.

Perhaps policy makers will wait till seeing the latest developments in the euro zone, noting that the euro area nations are Switzerland’s main trading partners.

The SNB still believes that “the franc is still high and should continue to weaken over time,” leaving the door opened for further future interventions if needed, especially as the latest data from the Swiss economy referred to a slowdown in the growth pace.

On the other hand, data from the United States gave some positivity to the sentiment last week with the improvement in continuing claims for the week ended December 03, empire manufacturing index and current account.

The Fed’s latest monetary decision signaled holding interest rate at its ultra-low level of 0.25% while policy makers referred that the world’s no.1 economy will continue its expansion.

Thus, it seems that the Fed will not add to stimulus after the progress seen recently.

This week, the main focus will be on Swiss trade data, while in the U.S. the main highlight will be GDP 3q annualized (third reading), housing data and other important news.