Forex Market: USD/CHF trading outlook for September 12th 2016

Friday’s trade (in GMT terms) saw USD/CHF within the range of 0.9710-0.9786. The pair closed at 0.9755, edging up 0.31% compared to Thursdays close. It has been the 13th gain in the past 23 trading days and also a third consecutive one. The daily high has been a level unseen since September 6th, when a high of 0.9813 was registered. In weekly terms, USD/CHF lost 0.50% of its value during the current week. It has been the 18th drop in the past 36 weeks. The major pair has pared its slump to 0.84% so far during the current month, following a 1.50% surge in August.

No relevant macroeconomic reports and other events, which may influence USD/CHF trading, are scheduled on Monday (September 12th).

US Dollar picks up after Rosengrens statement, North Koreas nuclear test

The greenback and the Japanese yen were broadly supported on Friday, following news that North Korea has conducted a fifth test of a nuclear warhead a day ago, in order to protect itself against “threats and sanctions” from hostile elements, the countrys official news agency said. The test was claimed to have invoked an earthquake with a magnitude of 5.3 near the states secretive nuclear test site. The last time North Korea tested its nuclear capabilities was in January.

Meanwhile, in a speech on Friday the Fed President for Boston and a member of the Federal Open Market Committee, Eric Rosengren, said low interest rate environment may increase the possibility of overheating the US economy. According to Rosengren, in order to maintain full employment, it is appropriate to gradually tighten monetary policy. His remarks somewhat reinvigorated investor expectations of a rate hike.

According to CME’s FedWatch Tool, as of September 9th, market players saw a 24.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, up from 18.0% in the prior business day, and a 28.7% chance of a hike in November, up from 21.3% in the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 59.2% on September 9th, up from 51.4% in the preceding business day.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, closed at a level of 95.33 on Friday, edging up 0.31% from a day ago. During the trading day the index went up as high as 95.58, or a level unseen since September 6th. The gauge has pared its drop to 0.71% so far in September, following a 0.54% advance in August.

Correlation with other Majors

Taking into account the business week ended on September 9th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CHF to USD/JPY (0.9723, or very strong)
USD/CHF to USD/CAD (0.5439, or strong)
USD/CHF to GBP/USD (-0.6393, or strong)
USD/CHF to AUD/USD (-0.8129, or very strong)
USD/CHF to EUR/USD (-0.8702, or very strong)
USD/CHF to NZD/USD (-0.9431, or very strong)

1. During the examined period USD/CHF moved strongly in the opposite direction compared to GBP/USD, while moving strongly in one and the same direction with USD/CAD.

2. USD/CHF moved almost equally in one and the same direction with USD/JPY during the past week.

3. USD/CHF moved almost equally in the opposite direction compared to AUD/USD, EUR/USD and NZD/USD during the period in question. This relationship has been the most pronounced between USD/CHF and NZD/USD.

Bond Yield Spread

The yield on Switzerland’s 2-year government bonds went as high as -0.840% on September 9th, or the highest level since September 1st (-0.786%), after which it closed at -0.934% to add 2 basis points (0.02 percentage point) compared to September 8th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.802% on September 9th, after which it fell to 0.782% at the close to add 0.008 percentage point compared to September 8th.

The spread between 2-year US and 2-year Swiss bond yields, which reflects the flow of funds in a short term, narrowed to 1.716% on September 9th from 1.728% on September 8th.

Daily, Weekly and Monthly Pivot Levels

By employing the Camarilla calculation method, the Monday levels of importance for USD/CHF are presented as follows:

R1 – 0.9762
R2 – 0.9769
R3 (Range Resistance – Sell) – 0.9776
R4 (Long Breakout) – 0.9797
R5 (Breakout Target 1) – 0.9821
R6 (Breakout Target 2) – 0.9831

S1 – 0.9748
S2 – 0.9741
S3 (Range Support – Buy) – 0.9734
S4 (Short Breakout) – 0.9713
S5 (Breakout Target 1) – 0.9689
S6 (Breakout Target 2) – 0.9679

By using the traditional method of calculation, the weekly levels of importance for USD/CHF are presented as follows:

Central Pivot Point – 0.9740
R1 – 0.9831
R2 – 0.9906
R3 – 0.9997
R4 – 1.0087

S1 – 0.9665
S2 – 0.9574
S3 – 0.9499
S4 – 0.9423

In monthly terms, for USD/CHF we have the following pivots:

Central Pivot Point – 0.9747
R1 – 0.9956
R2 – 1.0075
R3 – 1.0284
R4 – 1.0494

S1 – 0.9628
S2 – 0.9419
S3 – 0.9300
S4 – 0.9182