Forex analytics of LiteForex of 28.10.2010: CHF: Swiss franc is going to win back losses in pair with USD

In the currency market (forex) Swiss franc rises using the situation of uncertain mood in the market and winning back past losses.

Forex (forex) Forecast: MACD indicator is in the positive area for the pair USD / CHF but it decreases and thereby gives a signal to sell the pair. The signal of stochastic oscillator is the same today being in the overbought area.

Forex (forex) recommendations: if the level of 0.9860 is broken the pair will go to 0.9820 and 09790.

The market believes that CHF can fall if the USA announces a more modest economy support than it is now built into market prices. In addition talks are more frequent about the fact that QE is not a panacea for the American economy which may impede the further growth of CHF.

According to the averaged data GDP in Switzerland will have risen by 3% by the end of the year which is substantially higher in comparison with other countries. The levels of inflation will remain close to low. According to the official statistics in the second quarter GDP in Switzerland rose by 0.9% on quarterly basis (+3.4% y/y) against the forecast of +0.8% (+2.6% y/y). The private consumption index in Switzerland increased to 1.86 in July against the previous value of 1.81 (revised data: 1.80).

Last week the Swiss National Bank announced its forecast for inflation and the pressure on CHF decreased. In the SNB document it is noted that the forecast for inflation in the country is reduced until 2013: in 2011the inflation forecast is reduced to 0.3% from 1% earlier; in 2012  the inflation is expected at the level of 1.2% from 2.2% earlier.

Thus inflation will not touch the top of the range at least until the second quarter of 2012 - this gives the SNB another year to rectify the situation in the country's economy. Interestingly the CHF decline in the pair with EUR helps the economic system of Switzerland since the lion's share of exports is directed to the countries of the Eurozone.

A new forecast for the economy and inflation has played in favor of the SNB - the intervention would have the same downward effect on CHF; in this case it would have caused greater resonance in the market. Regulator eased the pressure of strong CHF receiving a temporary advantage to make decisions.Interestingly, the Swiss National Bank, apparently, continues to diversify its assets – the EUR assets dropped to 56% from previous 70%. The ratio of EUR against the currency basket of the SNB was about 50-60% last year - such situation was before the regulator began intervention in order to weaken the franc.

[More]