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FX Headlines: Franc Continues Rally to Record Against Euro

FX Headlines: Franc Continues Rally to Record Against Euro

2011-05-27 13:43:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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The Euro fell to an all-time low against the Franc as the funding and safe haven currency rallied across the board in the overnight. Given the weak data out of the United States before the start of the North American market session, coupled with low liquidity, the trading day ahead could be rough for the Greenback.

fx_headlines_franc_continues_run_against_euro_body_Picture_1.png, FX Headlines: Franc Continues Rally to Record Against Eurofx_headlines_franc_continues_run_against_euro_body_Picture_4.png, FX Headlines: Franc Continues Rally to Record Against Eurofx_headlines_franc_continues_run_against_euro_body_Picture_7.png, FX Headlines: Franc Continues Rally to Record Against Euro

Fundamental Headlines

IMF ‘Not Contemplating’ Greek Restructuring - CNBC

Price Gains Limit Spending Despite Gains in Income - CNBC

Kan Told Quake Will Not Influence Trade Deal – Financial Times

Russia Joins Western Chorus for Gaddafi to Go - Reuters

G-8 Launches ‘Arab Spring’ Partnership - WSJ

EURCHF: The Franc continued its remarkable run as the world’s emerging safe haven currency in the overnight session, gaining against the other seven major currencies. While the Franc had only gained 0.33 percent against the Euro at the time this report was written, the EUR/CHF pair had fallen to a record low as Europe’s sovereign debt concerns continued to plague the market, while Switzerland’s leading economic indicator remained at its highest level in five years. Still, the United States appears to be entering into the market’s crosshairs, as weak growth confirmed on Friday coupled with poor personal income and spending figures today have made it evident that growth in the United States is weak, at best.

Taking a look at price action, the EUR/CHF pair dropped below a significant level of support, its range bottom of 1.2270 of a descending channel dating back to late November. On a technical basis, the EUR/CHF pair looks ideal for a long play, given the extreme sentiment of some key technical indicators. The RSI on the daily chart remains below the oversold threshold, now at 26, and continues to trend lower. Even as the Slow Stochastic oscillator looks overextended, the %K remains less than the %D, signaling further loses before a potential turn. As I’ve noted previously, fundamentals always trump technicals, so despite the appealing technical situation to sell the Franc against the Euro or the U.S. Dollar, given the current market sentiment of risk-aversion due to the European sovereign debt crisis and U.S. debt, it is hard to advocate a long-trade on a fundamental basis.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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