The coming week has the US economic calendar quite packed, starting with Pending Home Sales report on Monday the 28th January, FOMC statement and ADP employment report on Wednesday and Non Farm Payrolls on Fridays.
USDCHF – Further decline on the horizon
The Dollar Franc has been in a downtrend since mid last year. Temporary spikes in November and December saw the price consolidate and further set itself up for a downtrend.
On Friday (25th January), Head of the Swiss National Bank, Thomas Jordan noted that the Swiss Franc is expected to continue to get weaker over time. He said that the Swiss Franc was still highly overvalued and the SNB does not rule out further monetary policy if the need arise.
Immediately after his comments, the bulls got in trying to shore up on the USDCHF, which saw a temporary spike, rising from 0.92291, going all the way to 0.92892 piercing the weekly pivot point.
The USDCHF pair soon lost momentum and settled lower to 0.92565.
Earlier in December last year, the pair touched a low of 0.90685.
In the figure below, we have the Andrew’s Pitchfork which shows us that the price tried to pierce the median line before falling back. A potential drop to the region of 0.922 and 0.914 is likely to happen. A breach of the lower median line (LML) could see price draw close to the warning line, thus putting the price further dropping to the range of 0.901 and 0.894.
Looking at the currency pair with pivot points on the weekly/monthly in place, we see a piercing of the monthly resistance at 0.9331 followed by a steady downward trend with the pair trading off the weekly pivot at 0.9280. It is possible that the monthly resistance 1 @ 0.9331 is holding up well so expect to see price fall to 0.9207 which is where most of the shorts will be exited while the weekly pivot might act as a key resistance level. If the monthly pivot fails to hold, a drop to 0.9172, weekly support is likely to happen.
Of course, we are looking at the daily chart and these price movements can happen well into February or even early March.
US Dollar – Key events to watch out for
Overall, the US economy has been showing signs of progressive growth, albeit some hiccups every now and then. For the month of February, there isn’t much ‘drama’ considering that the nagging issues of Fiscal Cliff and the Debt Ceiling have been put off until March and May respectively.
The week ahead will see lot of economic indicators that will definitely be driving the US Dollar. Of these, the key points to note include the GDP quarterly estimate (Q4 2012), due to be out on Wednesday. The general consensus being a growth of 1.3%, lower than the previous quarter’s 2%.
Later in the day, FOMC statement is expected to be released. Bernanke has hinted on keeping up with their open ended bond purchase program. A lower GDP could well validate his point.
Wednesday will also see the KOF Economic Barometer, which is an indicator for forecasting the economy over the six months. So far, past readings have fallen short of expectations with a decline since October 2012 mostly attributed to the Eurozone crisis. However, with mild signs of recovery from the Eurozone, it is likely that the coming months should see an upward growth for the Swiss.
On Friday, Non Farm Payrolls will be announced with expectations that the unemployment rate is likely to remain unchanged at 7.8% while unemployment claims might see a mild increase.
As far as the Dollar Swiss is concerned, the downtrend could possibly be smooth until Tuesday especially if there are shorts that have been opened already. Wednesday will see some uncertainty in the pair and is likely to set the tone for the remainder of the week. A potential rise to the upside is possible to happen, so going long on Wednesday is ideal to make some quick profits before the price retraces back to its original downtrend again.