by Swissquote Analysts
Forex News and Events
Swiss FX reserves edges lower (by Arnaud Masset)
After hitting a record level in November, yesterday’s data showed that the SNB’s FX reserves shrank for the first time since February. The SNB held CHF 645.3 billion worth of foreign currencies at the end of December, down CHF 2.5 billion (647.8bn at the end of November). Over 2016, reserves increased by CHF 85.8 CHF, the highest yearly increase since 2012, when they climbed by CHF 172.9 billion. All in all, the data underlines the fact that the SNB has once again spent the year fighting to defend the Swiss franc. Given the highly uncertain environment - Brexit, US elections - the central bank stuck to its commitment that “it will remain active in the market” and intervene to protect EUR/CHF against downside pressure. Looking at the exchange rate, the SNB's policy could be seen as a complete success as EUR/CHF remained roughly above the implicit floor of between 1.07 and 1.08 (rather 1.07 lately).
However, the SNB has another rough year in store as mounting political tensions between EU members will likely remain the main driver in 2017. In addition, the Greek crisis will make its comeback this summer as the country will face several principal repayments through the end of the summer. We therefore anticipate that upside pressure on the CHF against the euro will remain acute. Moreover, it seems that the marginal cost to weaken the Swiss franc has been rising lately especially as the latest FX interventions had very little impact. This morning, EUR/CHF was trading sideways at around 1.0710 after moving temporarily below the 1.07 threshold at the beginning of the week.
US stocks have upside
The post-election rally is making valuation feel stretched with P/E ratio on S&P 500 at its highest since the dotcom bubble. Yet, corporate earnings growth is forecasted over 10% so there is still further upside potential. Stabilisation in growth, an improvement in oil prices and most critically, a continued accommodating monetary policy will be the core drivers. Should Trump find even marginal success, fiscal stimulus, lower corporate taxes and a confident US consumer should push the current bullish rally. Concerning sectors, weaker regulations and idiosyncratic conditions in financials, energy and healthcare should outperform.
Swissquote Sqore Trade Ideas: http://en.swissquote.com/fx/news/sqore
Gold - Bullish Pressures Accelerate.
| Today's Key Issues | Country / GMT |
|---|---|
| Dec Foreign Currency Reserves, exp 649.0b, last 648.0b, rev 647.8b | CHF/08:00 |
| ECB's Villeroy Speaks in Paris | EUR/08:15 |
| 3Q Unit Labor Costs YoY, exp 1,70%, last 1,90%, rev 2,20% | GBP/09:30 |
| Dec FGV Inflation IGP-DI MoM, exp 0,67%, last 0,05% | BRL/10:00 |
| Dec FGV Inflation IGP-DI YoY, exp 7,00%, last 6,77% | BRL/10:00 |
| Dec Economic Confidence, exp 106,8, last 106,5 | EUR/10:00 |
| Dec Business Climate Indicator, exp 0,47, last 0,42 | EUR/10:00 |
| Dec Industrial Confidence, exp -0,4, last -1,1 | EUR/10:00 |
| Dec Services Confidence, exp 12, last 12,1 | EUR/10:00 |
| Dec F Consumer Confidence, exp -5,1, last -5,1 | EUR/10:00 |
| Nov Retail Sales MoM, exp -0,40%, last 1,10% | EUR/10:00 |
| Nov Retail Sales YoY, exp 1,90%, last 2,40% | EUR/10:00 |
| Nov PPI Manufacturing MoM, last 0,17% | BRL/11:00 |
| Nov PPI Manufacturing YoY, last -0,93% | BRL/11:00 |
| ECB Executive Board's Yves Mersch Speaks in Paris | EUR/11:15 |
| 1Q A GDP Annual Estimate YoY, exp 6,80%, last 7,60% | INR/12:00 |
| Nov Trade Balance, exp -$45.4b, last -$42.6b | USD/13:30 |
| Revisions: Seasonally Adjusted Household Survey Data | USD/13:30 |
| Nov Int'l Merchandise Trade, exp -1.60b, last -1.13b | CAD/13:30 |
| Dec Unemployment Rate, exp 6,90%, last 6,80% | CAD/13:30 |
| Dec Change in Nonfarm Payrolls, exp 175k, last 178k | USD/13:30 |
| Dec Net Change in Employment, exp -2.5k, last 10.7k | CAD/13:30 |
| Dec Two-Month Payroll Net Revision | USD/13:30 |
| Dec Full Time Employment Change, last -8,7 | CAD/13:30 |
| Dec Change in Private Payrolls, exp 170k, last 156k | USD/13:30 |
| Dec Part Time Employment Change, last 19,4 | CAD/13:30 |
| Dec Change in Manufact. Payrolls, exp 0k, last -4k | USD/13:30 |
| Dec Participation Rate, exp 65,6, last 65,6 | CAD/13:30 |
| Dec Unemployment Rate, exp 4,70%, last 4,60% | USD/13:30 |
| Dec Average Hourly Earnings MoM, exp 0,30%, last -0,10% | USD/13:30 |
| Dec Average Hourly Earnings YoY, exp 2,80%, last 2,50% | USD/13:30 |
| Dec Average Weekly Hours All Employees, exp 34,4, last 34,4 | USD/13:30 |
| Dec Labor Force Participation Rate, last 62,70% | USD/13:30 |
| Dec Underemployment Rate, last 9,30% | USD/13:30 |
| Dec Ivey Purchasing Managers Index SA, last 56,8 | CAD/15:00 |
| Nov Factory Orders, exp -2,30%, last 2,70% | USD/15:00 |
| Nov Factory Orders Ex Trans, last 0,80% | USD/15:00 |
| Nov F Durable Goods Orders, exp -4,60%, last -4,60% | USD/15:00 |
| Nov F Durables Ex Transportation, exp 0,20%, last 0,50% | USD/15:00 |
| Nov F Cap Goods Orders Nondef Ex Air, last 0,90% | USD/15:00 |
| Nov F Cap Goods Ship Nondef Ex Air, last 0,20% | USD/15:00 |
| Fed's Evans Speaks on Economy and Policy in Chicago | USD/16:15 |
| Fed's Kaplan Speaks in Chicago | USD/20:30 |
The Risk Today
EURUSD
EUR/USD has surged yesterday. The pair now lies above 1.0500. Hourly support lies at 1.0341 (03/01/2017 low). Stronger resistance is given at 1.0670 (14/12/2016 high). Expected to see continued sideways price action in the short-term. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.
GBPUSD
GBP/USD has exited downtrend channel. Hourly support lies at 1.2200 (03/01/2017 low) while resistance lies at 1.2388 (30/12/2016 high) has been broken. The technical structure suggests further increase. The break of resistance area around 1.2400 confirms further strengthening. 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.
USDJPY
USD/JPY has weakened and is moving away from hourly resistance given at 118.66 (15/12/2016 high). Hourly support can be found at 115.07 (05/01/2017 low). Stronger support lies at 114.74 (12/12/2016 low). Expected to see further downside 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).
USDCHF
USD/CHF is moving sideways between hourly resistance is given at 1.0344 (15/12/2016 high) and 1.0021 (08/12/2016 low). Key support is given at the parity. Expected to further consolidate above 1.0200. 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 | 1.3121 | 1.1731 | 125.86 |
| 1.0954 | 1.2775 | 1.0652 | 121.69 |
| 1.0874 | 1.2432 | 1.0344 | 118.66 |
| 1.0602 | 1.2385 | 1.0108 | 115.96 |
| 1.0341 | 1.22 | 1.0021 | 114.74 |
| 1 | 1.2083 | 0.9632 | 112.88 |
| 0.9613 | 1.1841 | 0.9522 | 111.36 |