Swiss Franc Rises Broadly as Dollar and Yen Pare Gains

Swiss Franc is the winner so far today, as Dollar and Yen pare back some of last week’s gains. Meanwhile, Euro is also soft after poor investor confidence data. On the other hand, New Zealand Dollar is following closely as second strongest, on anticipation of RBNZ rate hike later in the week. Other currencies are mixed for now, awaiting a clear direction.

Technically, GBP/USD is now pressing 1.3608 minor resistance and break there should confirm short term bottoming. We’d see if that would be followed by stronger rise in Sterling, and pushes EUR/GBP towards 0.8499 support. Or, it would be accompanied by selloff in Dollar, with EUR/USD breaking 1.1682 resistance and USD/CHF breaking 0.9214 support.

In Europe, at the time of writing, FTSE is up 0.07%. DAX is down -0.14%. CAC is down -0.01%. Germany 10-year yield is up 0.0026 to -0.219. Earlier in Asia, Nikkei dropped -1.13%. Hong Kong HSI dropped -2.19%. Singapore Strait Times rose 1.26%. Japan 10-year JGB yield dropped -0.0040 to 0.051. China was on holiday.

ECB de Guindos: Structural impact of current inflation goes beyond expected

ECB Vice-President Luis de Guindos said the current increase in inflation is “not only responding to base effects but is also a component that is going to have a more structural impact.” He added, “this is having an impact that goes beyond what we were expecting only a few months ago.” He expected supply bottlenecks to ease but emphasized the importance to “avoid second-round effects”.

On monetary policy, de Guindos said it will “remain accommodative but the goal is price stability.” “If economic activity normalizes, PEPP will have accomplished its mission.”

Eurozone Sentix investor confidence dropped to 16.9, still a mid-cycle slowdown

Eurozone Sentix Investor Confidence dropped to 16.9 in October, down from 19.6, missed expectation of 19.0. That’s the third decline in a row and the lowest level since April. Current Situation Index dropped from 30.8 to 26.3. Expectations index dropped from 9.0 to 8.0, fifth decline in a row, lowest since May 2020.

Sentix said, “Autumn revival fails to materialize for the time being”. It added, “so far, the criteria for a mere ‘mid-cycle slowdown’ have still been met. It remains crucial that the expectations do not fall below the zero line. For then a stronger slump in economic output would be expected – a trend reversal would then be in the offing.”

Swiss retail sales rose 0.5% yoy in Aug, CPI unchanged at 0.9% yoy in Sep

Swiss real retail sales rose 0.5% yoy in August, below expectation of 0.6% yoy. In nominal terms, sales rose 0.2% yoy. Excluding service stations, nominal turnover dropped -0.4% yoy. Sales of food, drinks and tobacco dropped -2.9% yoy nominal. No-food sector rose 2.1% yoy nominal.

CPI came in at 0.0% mom, 0.9% yoy in September, versus expectation of 0.2% mom, 1.1% yoy. The annual rate was unchanged from August’s reading.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9279; (P) 0.9308; (R1) 0.9334; More….

USD/CHF’s fall from 0.9367 accelerates lower today, but stays above 0.9214 support. Intraday bias remains neutral first. On the upside, break of 0.9367 will resume the rise from 0.8925 to 0.9471 key resistance next. On the downside, however, break of 0.9214 will turn bias back to the downside for 0.9017 support again.

In the bigger picture, the strong rally above 55 week EMA (now at 0.9188) now tilts favor to the case of bullish trend reversal. That is, decline from 1.3042 (2016 high) is probably completed at 0.8756 already. Sustained break of 0.9471 resistance should confirm this case and pave the way to retest 1.0342 ahead. However, rejection by 0.9471 will mix up the outlook again and retain some medium term bearishness.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Monetary Base Y/Y Sep 11.70% 15.30% 14.90%
06:30 CHF Real Retail Sales Y/Y Aug 0.50% 0.60% -2.60%
06:30 CHF CPI M/M Sep 0.00% 0.20% 0.20%
06:30 CHF CPI Y/Y Sep 0.90% 1.10% 0.90%
08:30 EUR Eurozone Sentix Investor Confidence Oct 16.9 19 19.6
12:30 CAD Building Permits M/M Aug -2.10% 3.30% -3.90% -4.10%
14:00 USD Factory Orders M/M Aug 0.90% 0.40%

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