Forex Analysis – Trade of the Day: USD/CHF 15th September 2014

Switzerland – Producer Price Index

At GMT 7:15 a.m., the Swiss Federal Statistical Office released the month-over-month Producer Price Index (PPI), that measures the changes in the price of goods and raw materials bought by manufacturers in Switzerland during the past month.

Since manufacturers would usually pass on the additional cost of acquiring raw materials to consumers, the PPI data act as a leading indicator of the future inflation in the economy.

Last month, Switzerland’s Producer Price Index came out at 0.0%, indicating no change. This month, however, the Producer Price Index was forecasted to come out at 0.2%. Nevertheless, the actual PPI figure came out at negative 0.2%, exactly opposite of the market’s expectation.

United States – Capacity Utilization Rate

At GMT 1:15 p.m., the US Federal Reserve published the report on percentage of available resources being utilized by manufacturers in the country, which is better known as the Capacity Utilization Rate.

Market analysts consider the Capacity Utilization Rate to be a leading indicator of the consumer inflation, because when manufacturers come close to using all available production capacity, they try to curb the demand by increasing prices. This hike in price is usually passed on to the consumers by wholesalers and retailers.

Last month, the US Capacity Utilization Rate was at 79.1%, and this month the forecast was set at a bit higher level, at 79.3%. The actual figure, however, came out at 78.8%.

Trade Recommendation for the USD/CHF

USD/CHF - 15th September

 

The USD/CHF has been trading upwards since August 5, and formed a well respected uptrend line. However, currently the USD/CHF price is trading near the upper trend line of the equidistant channel, where the Moving Average Convergence Divergence (MACD) indicator is showing a sign up potential change in trend.

If we consider the market fundamentals, especially, worse than expected US Capacity Utilization Rate, it would confirm the technical analysis that the USD/CHF price has the potential to decline from the level. However, the Swiss Producer Price Index has also gone down by as much as 0.2% last month, suggesting further upside potential. Basically, there is no concrete fundamental direction in the market right now, which is also reflected in the range bound price action of the USD/CHF during the last several days.

Having said that, the USD/CHF is currently trading near the support level around 0.9310, and if the price can close below this support level, technically speaking, there is a good chance that the price will retrace back towards the lower end of the channel. Based on Fibonacci analysis, it may find the next support around the 0.9250 and 0.9160 levels.

Hence, if the price closes below the 0.9310 level, it would indicate a PUT in the USD/CHF.

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Asif Imtiaz

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