Mid-Day Report: Swiss Franc Soars on Safe Haven Flows

Swiss franc continues to ride on wave of risk aversion trade and strengthens across the board today. Its strength impressively surpasses yen and dollar. Some cites the strong UBS consumption indicator, which rose to two year high of 1.86 as a trigger for swissy's strength. But it's believed that safe-haven flow from other European countries are the main driving force. Euro hit another record low against swissy and is now sustaining below 1.3 level. Sterling also dives against swiss franc after taking out 1.58 support level. In addition to that, Hungary's forint also fell to a record low against the swiss franc. We'd anticipate more upside in CHF in near term.

Elsewhere, dollar is mixed for the moment. The greenback is noticeably weak against swissy and yen. And some strength is seen against Aussie, Canadian and sterling. However, EUR/USD staged an intraday reversal today and rebounds strongly. There is also additional pressure from Gold which is heading towards 1250 level now. We're not expecting the greenback to regain strength soon. Data from US saw S&P Case-Shiller 20 cities house price rose more than expected by 4.2% yoy in June. Focus will shift to Chicago PMI, consumer confidence and FOMC minutes.

Other data released today saw Canadian GDP rose 0.2% mom in June, inline with expectations. Eurozone unemployment rate was unchanged at 10% in July. Flash CPI dropped to 1.6% yoy in August. German unemployment dropped slightly less than expected by -17k in August while unemployment rate was unchanged at 7.6%. UK Gfk consumer confidence improved more than expected to -18 in August. Japan industrial production rose 0.3% mom, 14.8% yoy in July, retail sales rose 3.9% yoy in July, housing starts rose 4.3% yoy but PMI manufacturing dropped to 50.1 in August. Australian building approvals snapped a three month losing streak and rose 2.3% mom in July. retail sales rose more than expected by 0.7%. Swiss UBS consumption indicator rose to 1.86 in July.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0229; (P) 1.0269; (R1) 1.0300; More.

USD/CHF's down trend resumes today and reaches as low as 1.0164 so far. Intraday bias remains on the downside and further decline should be seen to lower trend line support (now at 1.0040). But we'd anticipate strong support at around parity to contain downside, at least initially. On the upside, break of 1.0308 resistance will in turn argue that a short term bottom is formed and bring recovery towards 1.0624/39 resistance zone.

In the bigger picture, USD/CHF is possibly in the process of forming a medium term sideway pattern that started at the long term bottom of 0.9634 (2008 low). The pair will continue to stay in converging range of 0.9634/1.2296 for a while. A break of either 0.9916 support or 1.1729 resistance is needed to indicate that USD/CHF is back into a directional trend. Otherwise, medium term outlook will remain neutral.

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