Forex News and Events
Swiss economy under constant pressure (by Arnaud Masset)
The latest batch of Swiss data suggests that the situation has in fact remained largely unchanged over the past few months as the country continues to suffer as a direct consequence of its safe-haven status. The consumer price index rose 0.3%m/m in March, matching consensus, up from 0.2% in February. On a year-over-year basis, the gauge contracted 0.9%, also matching the median forecast, down from -0.8% in February. The improvement of the monthly increase coincides with the end of February’s sales in the clothing sector (prices surged 4.8%m/m) and therefore the effect will be limited and short-lived. Overall, inflationary pressures remain subdued in Switzerland against the backdrop of low commodity prices and a strong Swiss franc. We therefore expect the SNB to revise down its CPI forecast for 2016 (currently at -0.40%y/y at year-end) at its next quarterly meeting on June 16, as the economy continues to adjust to the strong CHF environment.
Jobs data, which also came in this morning painted a mixed picture of the Swiss job market. Even though unemployment decreased to 3.6% in March from 3.7% in February, the seasonally adjusted measure rose to 3.5% from 3.4% in the previous month, suggesting that the underlying trend in unemployment is not about to reverse just yet. In addition, when comparing the developments in the job market between the euro zone and Switzerland, one notices that Swiss unemployment has in fact risen continuously since 2013, while in the euro zone the measure has started to reverse the trend, falling from 12.10% to 10.30%. Overall, economic conditions should continue to deteriorate further in Switzerland as the country continues to adapt to the strong environment. This process is not yet complete.
Yesterday, data showed that the SNB’s foreign currency reserves rose 5bn to CHF575.8bn from CHF571.1bn, suggesting that the central bank may have intervened in the foreign-exchange market to defend EUR/CHF. This confirms the steady increase in SNB sights deposits since the beginning of year. Even though the increase remains modest, it highlights the fact that there is no respite for the SNB. The central bank cannot lower its guard as speculators would take advantage of the situation at the first sign of weakness. The data suggests that the SNB is moderately intervening in the FX market, just to remind traders not to play around with the EUR/CHF. This morning EUR/CHF is consolidating at around 1.0880. The closest support lies at 1.0810 (low from February 29th).
Don’t believe in the hype (by Peter Rosenstreich)
JPY strength has dissipated slightly as a rash of verbal intervention from Japanese officials has scared off speculators. Finance Minister Aso reiterated earlier calls to take necessary steps against FX moves suggesting that sudden JPY moves "undesirable". Chief Cabinet Secretary Suga step into the fray stated that JPY moves were not based on fundamentals. Japanese February MoF March flow data indicated that Japan’s current account surplus developed in February. This indicates that Japanese domestic investor demand for foreign assets according to weekly portfolio flow data has been increasing. However, despite the outflow (possibly due to hedging positions), demand for JPY by external investors has pushed up the JPY. We anticipated that official Japanese rhetoric is likely to increase the close we get to 105.00. The clear spillover effect of strong JPY on import prices all but kills Japanese policymaker’s ability to fight against deflation. While predicting central bank inventions have left many a good analyst bloodied, we believe that the pain threshold of the BoJ in USDJPY is closer to 100-104. First of all PM Abe's statement on this week suggested to "refrain from arbitrary interventions in FX markets" and second the broad credibility of the BoJ is already in doubt. Specifically in regards to weakening the JPY we believe that the BoJ lacks real tools to effectively weaken the JPY for extended period of time. Ineffective direct FX intervention will only further damage the central banks reputation.
EUR/CHF - False bearish breakout? 
The Risk Today
Peter Rosenstreich
EUR/USD made an intraday bearish reversal close to the hourly resistances at 1.1453 (107/04/2016 high). Monitor the recent low at 1.3338 (07/04/2016 low) as price remain below resistance at 1.1405 (07/04/2016 range high). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further range-bound pattern. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located at 1.1640 (11/11/2005 low). The current technical appreciation implies a gradual increase.
GBP/USD's short-term bearish momentum is still on. Hourly supports at 1.4171 (01/04/2016 low) and at 1.4033 (03/03/2016 low) have been broken. Hourly resistance is given at 1.4322 (04/04/2016 high). Expected to show further consolidation below 1.4000. The long-term technical pattern is negative and favours a further decline towards 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.
USD/JPY is likely in a short-term rebound following bearish break of key support. The pair has exited its short-term downtrend channel indicating further downside risk. Hourly support can be located at 107.68 (07/04/2016 low). Hourly resistance is given at 109.88 (07/04/2016 high) while strong resistance is given at 113.80 (29/03/2016 high). Expected to further weaken. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).
USD/CHF has managed to close above its key trendline support at 0.9522 (16/04/2013 low). The resulting selling pause is likely to lead to a short-term rebound. Hourly support can be found at 0.9522 (intraday low) while hourly resistance is located at 0.9622 (06/04/2016 high). Stronger resistance can be found at 0.9788 (25/03/2016 high). Expected to show further consolidation. In the long-term, the pair is setting highs since mid-2015. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias.
