Forex Strategy Briefing: USD/CHF Bottoming?

  @ibtimes on June 29 2010 2:55 AM

The dollar traded mostly higher on Monday. US personal income posted a third successive monthly gain in May and personal spending increased. The S&P 500 declined 2.19 to 1,074.57. The yen was down modestly. Japan's month-on-month retail sales fell the most in five years. The euro dropped ahead of the expiration of the large-scale European Central Bank lending facility later this week. Banks have to repay €442 billion in one year funds to the ECB on Thursday. Following Friday's penetration of important resistance, the pound rose on comments by Bank of England policy maker Andrew Sentence who said UK interest rates need to rise slowly. The Australian and Canadian dollars were little changed.

The USD/CHF has fallen 13 out of the last 15 trading days following the Swiss National Bank's decision to end its intervention to ease deflationary pressures in Switzerland. Giving back most of its gains between May and June, the pair is currently oversold. The relative strength index is below 27. The USD/CHF approached the strong 1.08-area support. Resistance is in the 1.10-1.11 area. We buy the pair with stop at 1.0680.

 

Financial and Economic News and Comments

US & Canada US personal income grew a marginally less-than-expected 0.4% m/m in May, a third consecutive monthly gain, after an upwardly revised 0.5% m/m advance in April, data from the Commerce Department showed. Personal spending was up as forecast 0.2% m/m, following April's 0.0% m/m. Personal income rose 1.6% y/y in May; personal spending rose 4.6% y/y. Disposable personal income increased 0.4% m/m in May, a third successive monthly advance, following upwardly revised gains of 0.6% m/m in April and 0.5% m/m in March. The savings rate rose to 4.0% in May, the highest level since September 2009, from April's upwardly revised 3.8%. The personal consumption expenditure deflator was unchanged m/m in May; however, rising 1.9% y/y following April's 2.0% y/y advance. The core PCE deflator, which excludes food and energy, was up 0.2% m/m and 1.3% y/y in May.

The Chicago Fed national activity index slipped to 0.21 in May from a downwardly revised 0.25 in April, led by declines in employment- and housing-related indicators, suggesting the national economy posted aboveaverage growth for a third successive month, compared with May 2009's -2.30 level, according to a report released by the Federal Reserve Bank of Chicago. The index' 3-month moving average increased to 0.28 in May, a second consecutive gain and the highest since March 2006, from an upwardly revised 0.05 the prior month, compared with May 2009's -2.62 level.

The Dallas Fed current general business activity index declined to -4.0 in June, the first negative reading in four months, from 2.9 in May, the latest Texas manufacturing outlook survey released by the Federal Reserve Bank of Dallas showed. The future general business activity index fell to 13.7 from May's 28.0; however, showing positive readings for 11 straight months.

Europe Euro-area M3 declined 0.2% y/y in May, the same rate as in April, the European Central Bank reported. The M3 3-month average declined 0.2% y/y in the March - May period, the same rate as in the February - April period.

Germany's consumer prices grew as forecast 0.1% m/m in June, the fourth advance in five months, after increasing at the same rate in May, preliminary June CPI data from the Federal Statistical Office showed. The consumer-price inflation rate was at 0.9% y/y, an eighth straight year-on-year rise but slowing from May's 1.2%y/y. The harmonised index of consumer prices, calculated for European purposes, was unchanged m/m in June after a 0.1% m/m increase in May. The HICP rate decelerated to 0.8% y/y from May's 1.2% y/y.

UK house prices were up a modest 0.1% m/m in June, an 11th straight month-on-month gain, to an average of £158,900 ($239,574) per home, after a 0.2% m/m increase in May, Hometrack reported. House prices grew 2.1% y/y, a fifth successive year-one-year advance, following May's 2.0% y/y rise.

Asia-Pacific Japan's retail sales fell a seasonally adjusted 2.0% m/m in May, the first fall in five months and the deepest in five years, after a 0.5% m/m decline in April, according to data from the Ministry of Economy, Trade and Industry. Retail sales increased 2.8% y/y to ¥11.044 trillion ($123.57 billion), a fifth consecutive year-on-year gain but the slowest since January, following April's 4.9% y/y rise. Sales at large-scale retail stores decreased 4.0% y/y to ¥1.563 trillion in May, a 26th straight year-on-year slide, after a revised 3.7% y/y April decline.

 

FX Strategy Update

 
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
EUR/JPY

Primary Trend
Negative
Neutral
Negative
Positive
Negative
Neutral
Negative

Secondary Trend
Negative
Neutral
Neutral
Neutral
Neutral
Negative
Negative

Outlook
Negative
Positive
Positive
Positive
Positive
Negative
Negative

Action
Short
None
None
Buy
Long
None
None

Current
1.2274
89.35
1.5096
1.0869
1.0359
0.8710
109.66

Start Position
1.4628
N/A
N/A
N/A
1.0247
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
1.2680
N/A
N/A
1.0680
1.0075
N/A
N/A

Support
1.2150
88.50
1.4800
1.0850
1.0200
0.8500
109.50

1.1900
87.00
1.4450
1.0600
0.9900
0.8100
108.00

Resistance
1.2400
91.00
1.5200
1.1100
1.0450
0.8800
114.00

1.2550
93.50
1.5400
1.1400
1.0750
0.9000
120.00

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