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FX Weekly Review, November 28 – December 02: CHF Index still at its 4% loss since U.S. Elections

 

Swiss Franc Currency Index

The Swiss Franc index continued around its 4% loss since the U.S. elections, while the US Dollar index had a 4% increase.

 

 

Trade-weighted index Swiss Franc, December 02

(see more posts on Swiss Franc Index, )
Trade-weighted index Swiss Franc, December 02

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Swiss Franc Currency Index (3 years)

The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).
Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.      

Swiss Franc Currency Index, December 02

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Swiss Franc Currency Index, December 02

. Source: FT.com - Click to enlarge

USD/CHF

Leaving aside the larger and longer-term views, market participants are split over the dollar’s near-term outlook.
The steady beat of favorable US economic news will slow next week, just given the calendar.

The focus shifts to the ECB meeting, where
participants are wary of a hawkish ease.
  This would mean that even if the central bank extends its purchases, as widely expected, it may signal that it is not an open-ended commitment.

We suggest the near-term price action should be respected, which is to say that the consolidation of the dollar’s gains that
we anticipated could evolve or morph into an outright correction.

What we propose to do is identify levels that could signal a genuine dollar correction drawing from technical analysis.

 

US Dollar/Swiss Franc FX Spot Rate, December 02

(see more posts on USD/CHF, )
US Dollar/Swiss Franc FX Spot Rate, December 02

. Source: FT.com - Click to enlarge

US Dollar Index

 

The Dollar Index snapped a three-week advance.  A convincing break of the 100.65,  would likely signal a deeper setback that pushes the basket to 99.70 and possibly 99.00. The technical indicators that we noted were mixed last week have all turned lower.

After the US jobs data, the Dollar Index tested a downtrend line on the hourly bar charts to set the session high.  A move above there (~101.10) would likely help blunt some of the technical negativity.

 

US Dollar Currency Index, December 02

(see more posts on Dollar Index, )
US Dollar Currency Index, December 02

. Source: FT.com - Click to enlarge

EUR/USD

The euro rose to ten-day highs before the US jobs data just shy of $1.07.   Here too the technical indicators point to downside risk for the dollar.   However, ahead of the political events on December 4 and the ECB meeting on December 8, participants have been reluctant to buy euros, preferring sterling or the Swiss franc to play for a near-term bounce.   It is not as clean of a bottoming pattern as the potential topping pattern in the Dollar Index, but a move above $1.0710-20 would likely point to a stronger euro recovery that could see $1.0800-$1.0850.  A move below $1.06 may confirm this relatively flat consolidation.

 

 

Euro/US Dollar FX Spot Rate, December 02

(see more posts on EUR/USD, )
Euro/US Dollar FX Spot Rate, December 02

. Source: FT.com - Click to enlarge

USD/JPY

The dollar stalled in front of JPY115, having
reached JPY114.80 on December 1.
  It retraced more than 38.2% of the week’s gains (from November 28 low near JPY111.35), which was found near JPY113.50.  The 50% retracement is found at JPY113.10, and the 61.8% is near JPY112.70.  The RSI did not confirm the new high, leaving a bearish divergence in its wake.

The Slow Stochastics have been moving lower, and also did not confirm the new high recorded.  The MACDs have not turned down but are set to do so early next week.

USD JPY Technical December 02

USD JPY Technical December 02

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GBP/USD

Sterling is near two-month highs.
It is flirting with the 50% retracement of the down move since early September (~$1.3445) which is found near
$1.2645.

There is little between there and the 61.8% retracement ($1.2830).  The RSI and MACDs allow for additional near-term gains, but the technicals are getting stretched, and sterling finished the week above the upper Bollinger Band (~$1.2320)   There is more talk/hope of a soft Brexit, and this is understood to be sterling positive.  Supreme Court hears the government’s appeal, though no decision is expected for several weeks.

GBP USD Technical

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AUD/USD

The Reserve Bank of Australia meets in the
week ahead. 
Policy is also on hold. The Australian dollar looks constructive.  Look for a move through the 20-day moving average (a little below $0.7500, and area that capped the Aussie in recent sessions), which also corresponds to a 38.2% retracement of the drop since the election.  The 50% retracement is found at $0.7545 and the 61.8% at $0.7600.

Australian Dollar / US Dollar FX Spot Rate, December 02

(see more posts on Australian Dollar, )
Australian Dollar / US Dollar FX Spot Rate, December 02

. Source: FT.com - Click to enlarge

USD/CAD

The Canadian dollar was the best performing
major currency last week (+1.7%) after the Norwegian krone (1.8%). 
Two fundamental considerations were at work.  First is the 11.6% rally in oil price following OPEC’s announcement.  Second is the seven basis point narrowing of the Canadian discount to the US on the two-year money.  The US dollar fell to CAD1.3255 before the weekend, a two-month low.  The five and 20-day moving averages crossed for the first time since late October. Technical factors warn of the risk of
additional near-term US dollar losses, though it closed near its lower Bollinger Band (~CAD1.3290).  A break of CAD1.3200 CAD1.3230 could spur a move toward CAD1.30.  The Bank of Canada meets next week, but policy is on steadfastly on hold.

 

 

US Dollar / Canadian Dollar FX Spot Rate, December 02

(see more posts on Canadian Dollar, )
US Dollar / Canadian Dollar FX Spot Rate, December 02

. Source: FT.com - Click to enlarge

Crude Oil

Leaving aside whether one thinks that OPEC
members will really deliver the output cuts they have promised, or whether non-OPEC oil producers participate in cuts, the technical indicators in the light sweet crude oil futures warn that further price rises.

The next target is the double high from October near $52.75.  The June high was another dollar higher.  Initial support is pegged near $50.

Crude Oil, December 02

(see more posts on Crude Oil, )
Crude Oil, December 02

. Source: Bloomberg.com - Click to enlarge

U.S. Treasuries

The US 10-year yield rose to almost 2.50% on
December 1, but this could have very well completed the move that began from around 1.80% before the election. 
The market will have to fish for a bottom in yields.  The first place to look may be near 2.30%.  The December 10-year note futures fell to 124-11 on December 1 and finished the week nearly a big figure higher.  Technically, there is near-term scope toward 126-00.

Above there is the 20-day moving average near 126-19 and then 126-28.

Yield US Treasuries 10 years, December 02

(see more posts on U.S. Treasuries, )
Yield US Treasuries 10 years, December 02

. Source: Bloomberg.com - Click to enlarge

S&P 500 Index

The S&P 500 snapped a three-week 6%advance.  The Slow Stochastics have rolled over, and the MACDs are about to turn.

The RSI is flat in the high 50s.   A push back to
2177-2180, the 20-day moving average and the 38.2% retracement of the post-election rally is the first downside target below the 2187 low on December 1.  Below there is 2170.

 

S&P 500 Technical December 02

S&P 500 Technical December 02

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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