USD/CHF Forecast Dec. 30, 2011, Fundamental Analysis

On Thursday trading, the pair showed an advance for the second straight session as it followed the general sentiment which was full of bearishness after Italian bond sale and as the ECB announcements remained to affect investor’s risk appetite.

Still, the main focus is on the latest developments from the euro area amid the mounting speculations the European debt crisis will cloud global recovery in 2012.

A bond selling in Italy on Thursday saw a drop in yield  of the 10-year notes to 6.98% compared with 7.56% in the previous auction while the 2014 bills recorded a drop in yields to 5.62% from 7.89% in Nov. 29 auction.

Although the yield has declined for the 10-year bills, still the rate is considered high as it is still near 7%, the rate which triggered bailouts forGreeceandPortugal.

It is noticeable that the downbeat announcement by the ECB on Wednesday, which stated that the balance sheet soared to 2.73 trillion euros, where lending to banks climbed to 879 billion euros in the week ended Dec. 23 on the back of last week’s 489 billion euros three-year loans lent to 523 banks, remained to have effect on investor’s risk appetite.  

The announcement raised concerns the ECB will continue its support to banks to avert a financial disaster.

The worries are helping the dollar which became more favorite refuge than the Swiss franc due to the several interventions and announcements from the SNB to halt the franc’s rally.  

Moreover, data from theU.S.showed that initial jobless claims for the week ended Dec. 23 rose to 381,000 compared with the revised 366,000 a week before.

On Friday, The week ends with the release of no data from both economies and therefore the pair is predicted to follow the general sentiment in the market.