Swiss retail sales fall for 5th straight month

Forex News and Events

No Magic of Christmas for Switzerland (by Arnaud Masset)

Swiss retail sales contracted for a fifth consecutive month in December; the real gauge fell 1.6%y/y in the last month of 2015 as spending for clothes and footwear shrank 9.3%. When excluding fuels real retail sales contracted 1.5%y/y. Clearly the warm winter weather has restrained traditional heavy spending on recreation in the Alps. The combined effects of a strong Swiss franc and gloomy global outlook continued to weigh on broader retail trade turnover and consumer sentiment. Nevertheless, with the ongoing stabilisation - and even improvement - of EUR/CHF, we should see a slow recovery of the retail sector as we head further into 2016; but nothing significant however. The threat of the ECB is always in the back of the investors’ mind and should prevent any substantial improvement of the Swiss economy as long as the euro zone remains on the edge of deflation. So far, EUR/CHF reacted positively to the news and is on its way to test the next resistance standing at 1.1150.

Eurozone unemployment improved slightly (by Yann Quelenn)

December's unemployment figure has been released today slightly better at 10.4% vs 10.5% expected. It is the lowest rate in a little more than four years. Yet, significant disparities remain amongst European countries. For example both Spanish and Greek jobless rates both top 20%, while Germany on the other hand looks much healthier with an unemployment rate of only 4.5% in November.

We remain quite concerned about the mid-term future of the Eurozone. While we know that Draghi will do “whatever it takes” to drive up inflation towards the 2% target we should consider that Germany’s patience for massive QEs may eventually run out, if they feel that they are the ones footing the bill.

However, the unemployment rate is far too high to enable a push up in inflation. As a result, there is simply not enough momentum to create growth and so, from our standpoint ECB stimulus is the only way to artificially maintain the illusion of recovery. Yet, in the United States, one dollar of revenue costs more than 3 dollars of debt. So there are still some room for the ECB to manoeuvre. The key issue will be whether the central bank will be able to increase inflation in the long run. We remain dubious judging from this approach’s track record in U.S. and Japan and with the poor results we are seeing in both cases. We are particularly sceptical when we see Japan, which is in all-in mode, has also now adopted negative rates (amidst massive QEs) for some deposits from commercial banks.

EUR/GBP - Trading In Range

The Risk Today

Yann Quelenn

EURUSD is riding the downtrend channel. Hourly resistance may be found at 1.1096 (28/10/2015 low) while hourly support can be found at 1.0524 (03/12/2015). The medium-term technical structure is clearly negative. Yet, expected to show further very short-term increase. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBPUSD is growing inside a channel. Hourly resistance at 1.4413 (26/01/2016 high) has been broken. Stronger resistance can be found at 1.4969 (27/12/2015 high). Hourly support can be found at 1.4081 (21/01/2015 low). Expected to show further decrease inside the channel before bouncing back. The long-term technical pattern is negative and favours a further decline towards the key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USDJPY is now consolidating after the last week sharp increase. The pair keeps on trading in range. Hourly resistance lies at 123.76 (18/11/2015 high). Hourly support lies can be found at 115.98 (20/01/2016 low). Expected to show further increase toward resistance a 123.76. 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).

USDCHF keeps on riding the uptrend channel. Hourly support is located at 0.9876 (14/12/2015 low) and hourly resistance can be found at 1.0328 (27/11/2015 high). Expected to show continued strength. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.

Resistance and Support: