Swiss trade surplus narrowed on weaker watch exports

Forex News and Events

Swiss exports improve marginally (by Yann Quelenn)

Swiss trade surplus is narrowing. This morning’s data confirmed this trend. September Swiss imports rose 2.6%m/m (prior -4%) and exports printed positive for the second month in a row at 0.2%m/m. The Swiss economy is clearly struggling to get back on the expansion track. Inflation is pushed down as the strength of the Swiss Franc, while increasing the purchasing power, adds prices’ downside pressures.

From our vantage point it is clear that Swiss industry is not yet fully recovered. The economy is also feeling the heat of its return to its safe haven status. Global uncertainties about the first Fed rate hike increase the risk-off sentiment and capital is likely to flow back into the Swiss economy which would, ironically, continue to impact exports.

More Fed speak (by Peter Rosenstreich)

Despite clear evidence in recent weeks that the US economy is suffering through a soft-spot Federal Reserve Bank of San Francisco President John Williams still expects rates will rise in the near term then increase gradually. According to Bloomberg, Williams stated that monetary policy strategy creation “always has to be looking through the front window” since its economic effects have a delay. In his view, “the economy is still on a good trajectory.” Obviously he is looking ahead and not behind at weak domestic reads such as retail sales. William indicated that inflation’s downwards trend should stabilize and growth will remain solid, signifying that policymakers could hike rates soon. Given the noise in Fed communications recently, we would expressively discount William comments as market altering. Fed speak will be coming thick and fast this week yet it will be Chair Yellen’s views that carry the most weight. Yellen will provide brief remarks at a ceremony today at 11est. That said, NY Fed President Dudley and Fed Governor Powell will also be speaking today (and will have an opportunity to provide more substantive comments). In our view, the lack of clarity within the Fed indicates that members policy outlook has become more cautious. The front-end of the US yield curve has flattened suggesting the expectations for a rate hike in 2015 remains low. US 2-year yields is now hovering around the three month low at 0.56%. On the data front, we expect September housing starts to remain solid rising 1.8% to 1146k as building permits indicates a rise in single family housing. For the USD, global events are likely to have a larger impact then domestic events. A dovish Draghi at the ECB rate decision meeting signaling the potential increase/extension to asset purchased could trigger USD buying. EURUSD correction lower will be challenged by the 21d MA at 1.1275 then uptrend channel support at 1.1241.

EURGBP - Monitoring Support At 0.7302

The Risk Today

Yann Quelenn

EUR/USD is still in a bullish momentum despite short-term decrease. Hourly resistance for a short-term bounce is given at 1.1495 (15/10/2015 low). The mid-term buying interest is still strong. Other resistance can be found at 1.1561 (26/08/2015 low). Support lies at 1.1087 (03/09/2015 low). Expected test of the resistance at 1.1561. Since March 2015, the pair is improving. Key supports can be found at 1.0458 (16/03/2015 low) and 1.0000 (psychological support). The technical structure favours an eventual break higher. Strong resistance is given at 1.1871(12/01/2015)

GBP/USD remains in a range between support at 1.5078 (05/05/2015 low) and resistance at 1.5659 (18/09/2015 high). A long as prices remain in this range, there is no clear mid-term momentum. Expected test of resistance at 1.5529 In the longer term, the technical structure looks like a recovery as long as support given at 1.5089 stands. A full retracement of the 2013-2014 rise is expected.

USD/JPY has strengthened but has failed to break the higher bound implied the downside channel. Hourly support can be found at 118.07 (15/10/2015 low). Strong resistance is given at 121.75 (28/08/2015 high). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF is pushing slightly higher. Hourly resistance can be found at 0.9740 (07/10/20150 low). Hourly support is given at 0.9476 (15/10/2015 low). Expected challenge of the support at 0.9746. In the long-term, the pair has broken resistance at 0.9448 suggesting the end of the downtrend. This reinstates the bullish trend. Key support can be found 0.8986 (30/01/2015 low).

Resistance and Support: