USD/CHF Weekly Forecast Dec. 5-9, 2011, Fundamental Analysis

The USD/CHF showed decline in the week ended Dec. 2 after four weeks rally as the ease in tensions in markets damped demand on the dollar as a refuge.

Financial markets saw a rebound in shares and high-yielding currencies after coordinated action from central banks and on hopes European leaders will respond to international pressure to resolve debt crisis.

The Fed and other five central banks decided to lower the dollar liquidity swap lines by 50 basis points and extend authorization till Feb. 1, 2013 to “ease strains in financial markets.”

On the other hand, there are hopes European leaders will adhere to the pressure from world leaders to resolve crisis as they gather inBrusselsnext week to discuss amendments in EU treaty and proposals forEurope’s future.

Regarding fundamentals, data from theU.S.showed improvement, especially manufacturing and the jobs report while Swiss growth and manufacturing figure missed expectations.

This week, eyes will be on Swiss inflation and unemployment data as well as other reports.

For this week, the release of the data will be as follows:

Monday Dec. 5:

While the Swiss economy lacks fundamentals, the U.S. ISM non-manufacturing report to follow the status of the services sector, especially after the improvement in manufacturing seen in last week’s report. The data released at 15:00 GMT is expected to show a widening expansion to 53.5 in Nov. from 52.9 in Oct. At the same time, factory orders for Oct. will show 0.4% drop from the prior 0.3%, according to median estimates.

Tuesday Dec. 6:

As of 08:15 GMT, the Swiss economy will release CPI for Nov. where the reading is predicted to record -0.4% from the prior -0.1% on the year while rise to 0.0% from the previous -0.1% on the monthly basis. On the other hand, theU.S.has no releases.

Wednesday Dec. 7:

As of 05:15 GMT, the Swiss economy will release unemployment for Nov. with expectations referring to steadiness in the seasonally adjusted reading at 3.0%.

In theU.S., MBA mortgage applications for Dec. 2 at 12:00 GMT.

Thursday Dec. 8:

At 13:30 GMT, the U.S economy will release initial jobless claims for the week ended Dec. 2 and continuing claims for the week ended Nov. 25 will be available. Then, Wholesale inventories will be out at 15:00 GMT.

Friday Dec. 9:

The week ends with the release of trade balance, at 13:30 GMT, which is expected to show a narrowed deficit of $43.0 billion in Oct. from $43.1 billion deficit a month earlier. Thereafter, specifically at 14:55 GMT,UniversityofMichiganis estimated to rise to 65.0 in Dec. from 64.1 last month.

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