Forex News and Events
Swiss economy under constant pressure (by Arnaud Masset)
Switzerland’s real retail sales fell 1.6%y/y in May, while previous month’s figure was downwardly revised to -2.2%y/y from -1.9% first estimate, FSO’s data showed. Sales have been falling since August 2015 and the trend seems to have accelerated over the last few months. Even though the gloomy global economic outlook and the effect of the strong Swiss franc may be the main driver, the unfavourable spring weather conditions may have make consumers more reluctant to spend money. The combined effects of the global uncertainty and the strong Swiss franc are also making Switzerland less attractive for foreigners, which also impact, to a certain extent, retail sales figures.
The icing on the cake is that the Swiss manufacturing PMI fell to 51.6 in June from 55.8 in May, missing estimates of 55.3. The weak reading came on the back of a collapse of the production component, which fell to 53.8 from 57.2 in May, and purchase volume, which fell to 51.1 from 60.2. Finally, the price component dropped to 46.8 June from 51.9 in May. All in all, the report showed that the Swiss manufacturing sector would suffer greatly from the prospect of potential dislocation of the European Union and the reintroduction of customs tariff. Even though the consequences of the Brexit did not materialised yet, it already had some substantial effects on business and business confidence. Uncertainty has never been a business booster.
On the currency side, the Swiss franc did not react to news as EUR/CHF kept trading sideways at around 1.0830. Data released earlier this week showed that the SNB intervened for roughly CHF 5bn in the FX market. We expect deposits will show that the SNB intervened as well during the last week of June to stabilise the currency pair. EUR/CHF will however remain sensitive to the Brexit developments but with the uncertainty spreading on a longer time scale, the short-term effect should be less significant.
Japan: data still on the soft side (by Yann Quelenn)
The USD/JPY dropped during the night below 102 against the greenback as US Treasury dropped and consequently pushed down the dollar despite the important set of Japanese data, released during the night, came in on the soft side. The National CPI and the Tokyo CPI are still negative on an annualized basis weighed down by Food and Energy. The BoJ target on inflation looks further and further away.
Consumer spending keeps on declining despite a better labour market as well as the overall household spending has shrunk -1.1% in May from -0.4% a month before. The Manufacturer’s confidence given by the Tankan Survey, is more or less in line with previous reports. Yet, the survey was already completed before the Brexit results.
Next July 10, election for the Japanese upper house of Parliament will take place. First polls are already showing that Abe should maintain its majority. The confidence in the Abenomics still seems to prevail. Yet we consider that his attempt to reflate the economy is a failure. There is too few growth and no inflation in Japan. Currency wise. The USD/JPY should continue to be under pressure and we expect more stimulus to be added the 28th of July at the next BoJ meeting.
Silver - Breaking Long-Term Resistance. 
The Risk Today
Yann Quelenn
EUR/USD is trading mixed. Hourly support is given at 1.0913 (24/06/2016 low) while hourly resistance is located at 1.1155 (30/06/2016 high). Strong resistance is given at 1.1479 (06/05/2016 high). Sharp moves do not have to be ruled out as there are still a lot of uncertainties on asset pricing in the market. In the longer term, the technical structure favours a very long-term bearish bias as resistance at 1.1714 (24/08/2015 high) holds. The pair is trading in range since the start of 2015. Strong support is given at 1.0458 (16/03/2015 low). However, the current technical structure since last December implies a gradual increase.
GBP/USD has ended its short-term bullish retracement and is now edging lower. Hourly support lies at 1.3121 (27/06/2016 low) and hourly resistance is given at 1.3534 (29/06/2016 high). Uncertainties are important on the market, expected to show further sideways price action. The long-term technical pattern is negative and favours a further decline as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200-day moving average). Key support at 1.3503 (23/01/2009 low) has been broken and the pair is now trading around its lowest level in 31 years.,
USD/JPY is increasing, even though slowly. The medium-term technical structure continues nonetheless to favour a second leg lower. Hourly supports are given at 101.41 (27/06/2016 low0 and 99.02 (24/06/2016 low) while hourly resistance is given at 103.39 (01/07/2016 high). Expected to show continued increase in the short-term. We favour 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's upside has faded. Hourly resistance is given at 0.9837 (28/06/2016 high). Hourly support is given at 0.9648 (24/06/2016 low). A break of resistance at 0.9837 is needed to confirm a trend reverse. 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 a long term bullish bias since last December.
