Mid-Day Report: Swissy Strength Continues, Makes New Record High against Dollar, Euro, Sterling

Swiss Franc continues to be strong on safe-haven demand and reaches new record high against Dollar, Euro and Sterling today. The swissy is viewed as a hedging vehicle for global risks including, in particular, Eurozone peripheral country's fiscal problems. Economy in Switzerland is so far solid and SNB has refrained from intervention for some time. There are also position adjustments activities ahead of year end and the moves are over-extended by the thin nature of holiday markets.

Aussie is, also, another strong currency recently as supported by strength in commodity prices. Nevertheless, the Australian dollar lost some strength after China manufacturing PMI showed slowdown. HSBC and Markit released its finding for China's PMI. The reading fell, for the first time in 5 months, to a 3-month low of 54.4 in December from 55.3 in the prior month. The slowdown was mainly driven decline in 'output' and 'new orders' growths, while 'employment' expanded faster at 51.5 in December compared with 50.2 previously. According to HSBC, the slowdown is disinflationary but is not sufficient to contain inflation. China will likely accelerate tightening measures, including further rate hikes, to fight against inflation. Other data released saw Japan Manufacturing PMI improved to 48.3 in December.

Jobless claims report from US was mixed. Initial claims showed noticeable improvement to 388k in the week ended December 25. The figure was much better than expectation of 415k and was the best reading since July 2008. However, continuing claims rose by more than expected to 4.13m in the week ended December 18. Dollar remains mixed.

GBP/CHF's down trend extended further as as low as 1.4425. The break of lower channel suggests that the down trend is trying to accelerate. In any case, we'll stay bearish in the cross as long as 1.4890 resistance holds. We'd expect more decline to 100% projection of 1.6755 to 1.5089 from 1.6003 at 1.4337 next.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9429; (P) 0.9481; (R1) 0.9507; More.

USD/CHF drops further to as low as 0.9417 so far in early US session and remains week. Intraday bias remains on the downside for mentioned target of 100% projection of 1.2296 to 0.9916 from 1.1729 at 0.9349 next. Break will target 0.9 psychological level next, which is close to a key long term projection target. On the upside, 0.9455 minor resistance will turn intraday bias neutral and bring consolidations. But outlook will remain bearish as long as 0.9663 resistance holds.

In the bigger picture, the long term down trend is still expected to continue towards 61.8% projection of 1.8305 to 1.1288 from 1.3283 at 0.8946, which is close to 0.9 psychological level. On the upside, break of 1.0065 resistance is needed to be the first signal to indicate reversal. Otherwise, outlook will remain bearish.

Economic Indicators Update

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