USD/CHF Forecast Dec. 19-23, 2011, Fundamental Analysis

In the week ended Dec. 16, the USD/CHF showed incline for the second week as the tensions stemming from the euro area enhanced demand on the dollar as a refuge.

The rise in Italian bond yields, downgrade by Fitch to large European lenders and weak growth outlook for the euro area in addition to the uncertain outlook for the global economy gave strong support for the greenback.

However, the improvement in the U.S. data managed to ease some of the tensions in the market, yet it did not shift the sentiment as the main concern meanwhile is still on the euro zone as investors believe the debt crisis may drag global economies into another recession as well as financial turbulences with the beginning of 2012.

The franc got some support, however, after the SNB’s monetary policy opted to leave the 3-month Libor target rate at 0.0–0.25% while keeping the cap of the franc against the euro at 1.20, resisting pressure from exporters to push the rate to negative or raise the cap.

This week, the main focus will be on Swiss trade data, especially after the SNB said last week it still believes that “the franc is still high and should continue to weaken over time.” In the U.S., the main highlight will be GDP 3q annualized third reading, housing data and other important news.

The release of the data this week will be as follows:

Monday Dec. 19:

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.

Tuesday Dec. 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.

The main focus in the U.S. will be housing starts and building permits for Nov. due at 13:30 GMT which will provide evidence about the status of the housing market that triggered the 2008 crisis. Housing starts are expected to decrease to 630,000 from 628,000 in Oct., while building permits will probably show a fall to 633,000 from the prior 653,000.

Wednesday Dec. 21:

The Swiss economy will start the day with the release money supply M3 for the year ending Nov. at 08:00 GMT.

Eyes will be on MBA mortgage applications for Nov. 18 at 12:00 GMT while will be followed by existing home sales, as of 15:00 GMT, which are estimated to record 2.2% drop in Nov. compared with a prior of 1.4%.

Thursday Dec. 22:

In the U.S., the main focus will be on the main highlight of the week which is GDP annualized for the third quarter (third reading), which is predicted to remain unrevised at 2.0%, where it will be available at 13:30 GMT, while personal consumption will also linger at 2.3%.

Moreover, initial jobless claims for the week ending Dec. 9 and continuing claims for the week ending Dec. 18 will also be available at 13:30 GMT. Thereafter, at 14:55 GMT, University of Michigan confidence will show a rise to 68.0 in Dec. from the prior 67.7.

Friday Dec. 23:

The week ends with the release of durable goods report, at 13:30 GMT, which is predicted to show 2.1% advance in Nov. from the prior 0.7% drop.