Swiss exports disappoint

Forex News and Events

Swiss exports collapsed in October (by Arnaud Masset)

After surging 5%m/m in September, Swiss exports contracted significantly in October, falling 4.7%m/m in real term amid further contractions in watch (-25.5%), jewellery (-12.3%) and machine & electronics manufacturing (-5.6%) exports. On the other hand, pharmaceutical and chemical industries recorded the biggest surge in exports and helped to partially offset the drop in other sectors. Pharma exports grew 7% m/m in October. Compared to October 2015, working day-adjusted real exports contracted 3.3% as pharma went down 3.3%, machine & electronics manufacturing contracted 7%, watchmaking was off 17.8% and jewellery slid 30%.

Imports rose across the board in October with 10 out of 12 sub-groups growing. Real exports surged 2.8%m/m, led by pharma (+19%) and textile & clothing imports (16%). Compared to October 2015, working day-adjusted real imports grew 3.7%. All in all, the strength of the Swiss franc continued to provide a boost to importations, especially from the eurozone. On the other hand, exports’ growth to the eurozone were subdued.

In spite of the recent positive trend in exports, we still expect a cloudy future for Swiss exports, especially due to the strength of the Swiss franc. Last week, EUR/CHF tested the 1.07 threshold many times but never broke it to the downside. The rise in domestic sight deposits (+CHF5bn) suggests that the SNB stepped in to protect the franc. The pair returned to 1.0740 today; however given the significant political risk in the eurozone over the next year, we do not expect this pressure to ease yet.

Short Oil (by Peter Rosenstreich)

The news flow suggests that despite our skepticism OPEC is moving toward a deal to slow production glut. After optimistic chatter from the preliminary talks in Vienna oil extended react gains up 3.9% to $47.49 brl (highest level since October). With Saudi ramping up production to close their massive budget deficit they will be force to take the biggest productions cuts, which makes us still doubtful of a meaningful agreement. On the positive note since many nations are producing at full capacity there is little room for cheating any deal. However, the agreements snails like progress and deteriorating sovereign balance sheets do to sustained low oil prices indicates that we would short oil on rallies. In addition with a pro energy Presidential election Trump looking to unleash the US oil producer’s marginal productions cuts will quickly be filled by new crude sources. The upside in WTI remains limited (even with a 32.5m brl ceiling) without a fundamental pick up in global demand. While a failure to agree to a production cut will lead to a surge in the supply overhang and crashing oil prices.

WTI - Sharp bullish move.

 

Today's Key Issues	Country/GMT
Oct Retail Sales MoM, exp 0,40%, last 0,30%, rev 0,40%	DKK/08:00
Oct Retail Sales YoY, last 1,70%, rev 1,60%	DKK/08:00
Oct Public Finances (PSNCR), last 13.3b	GBP/09:30
Oct Central Government NCR, last 22.5b	GBP/09:30
Oct Public Sector Net Borrowing, exp 6.0b, last 10.1b	GBP/09:30
Oct PSNB ex Banking Groups, exp 6.0b, last 10.6b	GBP/09:30
3Q South Africa Unemployment, exp 26,60%, last 26,60%	ZAR/10:30
Nov CBI Trends Total Orders, exp -8, last -17	GBP/11:00
Nov CBI Trends Selling Prices, last 8	GBP/11:00
BOE Policy Maker Kristin Forbes Speaks in London	GBP/11:30
Oct Current Account Balance, exp -$3100m, last -$465m	BRL/12:30
Oct Foreign Direct Investment, exp $6500m, last $5233m	BRL/12:30
Sep Retail Sales MoM, exp 0,60%, last -0,10%	CAD/13:30
Sep Retail Sales Ex Auto MoM, exp 0,50%, last 0,00%	CAD/13:30
Bank of England Bond Buying Operation	GBP/14:50
Nov Richmond Fed Manufact. Index, exp 0, last -4	USD/15:00
Nov A Consumer Confidence, exp -7,8, last -8	EUR/15:00
Oct Existing Home Sales, exp 5.44m, last 5.47m	USD/15:00
Oct Existing Home Sales MoM, exp -0,60%, last 3,20%	USD/15:00
Oct Tax Collections, exp 148819m, last 94770m	BRL/23:00
Oct Formal Job Creation Total, exp -82500, last -39282	BRL/23:00

 

The Risk Today

Peter Rosenstreich

EUR/USD's buying pressures are back. Hourly resistance is given at 1.0652 (intraday high). The technical structure suggests that selling pressures are fading. A break of resistance at 1.0746 (17/11/2016 high) is needed to confirm a reversal. In the longer term, the death cross indicates a further bearish bias despite the pair has increased since last December. Key resistance holds at 1.1714 (24/08/2015 high). Strong support is given at 1.0458 (16/03/2015 low).

GBP/USD has successfully tested support at 1.2327. Resistance stands far away at 1.2674 (11/11/2016 high). Hourly support is given at 1.2302 (18/11/2016 low).Expected to see continue weakness. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY has bullish momentum has paused forming resistance at 111.18. Support is given around 109.80 (16/11/2016 low). Stronger hourly support lies at 108.56 (17/11/2016 low). Expected to see further upside moves. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF rally has stalled yet technicals remains strongly bullish. Hourly resistance is given at 10110 (intraday high) then 1.0123 (18/11/2016 high). Expected to see further consolidation. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.13	1.2857	1.2298	121.69
1.1259	1.2771	1.1731	114.87
1.0954	1.2674	1.0328	111.91
1.0635	1.2442	1.0098	110.81
1.0521	1.2355	0.9632	106.14
1.0458	1.2083	0.9522	104.97
1.0000	1.1841	0.9444	101.20