chf fundamentals

Euro, Swiss Franc Hold Below Key Resistance vs. US Dollar, EUR/USD Faces Euro-zone CPI on Friday

Thursday, 28 May 2009 22:37:04 GMT  |  Terri Belkas, Currency Analyst

The euro and Swiss franc were mixed across the majors, while EUR/CHF went completely unchanged, as the European currencies gained versus the US dollar, British pound, and Japanese yen, but lost against the commodity dollars. However, the euro and Swissie are showing signs of a possible turn from immediate resistance in the near term, as EUR/USD has been unable to push above 1.3950 and USD/CHF has failed to break below 1.0800. Furthermore, FXCM SSI – a contrarian indicator – has begun to show that the extremes we’ve seen in the currency pairs have started to break down, suggesting reversals may be on the way. Looking to the data on hand, the Swiss Federal Customs Office said that Swiss exports rose in April, helping to push the trade surplus to 2.6 billion francs from 151 million francs in March. Indeed, exports jumped for the first time in three months at a rate of 8.3 percent in April, the biggest gain in three years while imports fell 0.3 percent. Ultimately, the data suggests that with demand from the Euro-zone starting to pick up a bit, recovery may be around the corner for Switzerland.

On Friday, Eurostat is expected to report that annual CPI growth in the Euro-zone slowed to a 0.2 percent pace in May from 0.6 percent. This would mark a record low for the index, and the big concern here is that the persistent drop in prices signals how great the downside risks are for inflation, in that it could quickly turn into deflation. The European Central Bank has acknowledged that CPI could turn negative for a few months this year, but if we start to see the index contract more from month to month, the euro is likely to respond accordingly.

Related Article: Forex Indicators Forecast US Dollar May Bottom

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