CHF: Swiss Franc continues to weaken

Swiss Franc rate continues to weaken downward at the Forex currency market on Tuesday; it seems that due to the traders’ interest in safe currencies, Swiss National Bank strengthened control over the Franc.

Forex forecast: MACD indicator for the pair USD/CHF is growing in the positive area, maintaining a buy signal. Stochastic Oscillator goes up in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 0.8870, the pair USD/CHF will go to 0.8890 and 0.8920. If upward breakdown does not take place, the pair will consolidate at the current levels.SNB maintains firm position: any attempt of the Franc to be corrected and act as a safe asset is smoothed over at the very beginning.

It became known in the morning that trade balance in Switzerland amounted to +0.81  billion in August against the forecast of +1.97 billion: effect of the expensive currency and external background is obvious. As it was made public earlier volume of industrial production in Switzerland grew  by 2.3% y/y in Q2 against the forecast of +2.7% y/y.

Accoring to the data released earlier showed unemployment rate in Switzerland remained at the level of 3.0% in July. Statistics released earlier showed that the level of retail sales in Switzerland increased by 7.4% in June against the revised level of -3.9% in May. In addition, index of PMI SVME rose to 53.5 points in July against the forecast of 52.5 points.

The data released yesterday showed that unemployment rate in Switzerland remained at the level of 2.8% in August, the same as in July.  It is good that “long arms” of the Franc has not reached this important sector. Statistics which was made public before this decision showed that Switzerland slides down to deflation: CPI in August fell by 0.3% m/m against the forecast of decline by 0.2% m/m.

The data released earlier showed that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June. In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. Statistics released earlier showed that indicator of consumption UBS fell to 1.29 points in July against the level of 1.52 points in June. The indicator has been sliding down not for the first month, showing negative tendencies in the economy; therefore, tough position of the SNB will be most welcome.

At the meeting last week, Swiss National decided to leave the three-month Libor rate at the zero level, as expected. In the follow up comments SNB noted that it would continue to protect the target exchange rate of EUR/CHF at 1.20. In addition Regulator stated that Swiss GDP will grow by 1.5-2% in 2011 (previously it was the level of 2%); inflation will not exceed the level of 0.4% this year. CPI will be at the level of -0.3% next year and will be +0.5% in 2013.In addition, the CNB also confirmed its intention to buy foreign currency in unlimited volume in order to prevent growth of the Franc.