Forex - USD/CHF weekly outlook: January 16 - 20

Forexpros - The U.S. dollar rose to a four-day high against the Swiss franc on Friday, trimming some of the week’s losses after ratings agency Standard and Poor’s downgraded nine euro zone countries, including France.

USD/CHF hit 0.9574 on Friday, the pair’s highest since January 9; the pair subsequently consolidated at 0.9518 by close of trade on Friday, shedding 0.57% over the week.

The pair is likely to find support at 0.9388, the low of December 15 and resistance at 0.9594, the high of January 9.

The greenback was broadly higher after S&P cut ratings on Italy, Spain, Cyprus and Portugal by two notches and downgraded Malta, Slovakia and Slovenia by one level. Germany kept its triple-A rating.

French Finance Minister Francois Baroin said the loss of the triple-A rating was "not a catastrophe'' and stressed that France still had a solid AA+ rating.

Earlier Friday, a closely watched auction of Italian government debt met with weak investor demand, one day after an auction of Spanish government debt met with solid investor demand at sharply lower yields.

Meanwhile, talks aimed at negotiating a restructuring of Greece's debts broke down amid disagreements over how much money investors will lose by swapping their bonds, raising fears over a possible default.

The dollar tumbled to a five-day low against the Swissie on Thursday after European Central Bank President Mario Draghi said the bank saw signs of stabilization in the region’s economy, adding that the central bank’s recent refinancing operation had made a substantial contribution to improving the funding situation for banks.

The comments came after the ECB left the benchmark interest rate unchanged at 1.0%.

In the U.S., data on Thursday showed that the number of people who filed for unemployment assistance in the U.S. last week unexpectedly rose to 399,000 from 375,000 the previous week.

A separate report showed that U.S. retail sales rose less-than-expected in December.

Meanwhile, Swiss Finance Minister Eveline Widmer-Schlumpf said Switzerland may not name a permanent successor to Philipp Hildebrand as central bank chairman for several months.

Hildebrand quit on Monday after failing to prove that he was not involved in a currency trade made by his wife three weeks before he oversaw the introduction of a cap on the value of the Swiss franc.

In the week ahead, investors will be keeping a close eye on developments in the euro zone, amid concerns over the increased risk of sovereign debt contagion, while investors will also be looking ahead to U.S. data on inflation and the housing sector.

Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.

Monday, January 16

Switzerland is to release a government report on producer price inflation, a key indicator of consumer inflation.

Markets in the U.S. are to remain closed for a national holiday.

Tuesday, January 17

The U.S. is to publish the Empire State Manufacturing index, an important gauge of economic health.

Wednesday, January 18

Switzerland is to produce a report on the ZEW economic expectations index, a leading indicator of economic health.

The U.S. is to release government data on producer price inflation, followed by data on net foreign purchases of long-term securities, which is the balance of domestic and foreign investment. The Federal Reserve is also to produce its capacity utilization rate, a key gauge of consumer inflation, as well as data on industrial production. The country is also to publish official data on crude oil inventories.

Thursday, January 19

The U.S. is to publish government data on building reports, an excellent gauge of future construction activity, as well as a government report on consumer price inflation. Later in the day, the U.S. Department of Labor is to release data on unemployment claims, followed by official data on housing starts and a separate report on manufacturing activity in the Philadelphia area. 

Friday, January 20

The U.S. is to round up the week with a report by the National Association of Realtors on existing home sales, an important gauge of economic health.