Outlook for USD/CHF during the upcoming week

US dollar traded higher against the Swiss franc on Friday, after recent optimistic data out of the United States boosted speculation that the Federal Reserve Bank may taper further.

USD/CHF touched a session high at 0.9058 at 20:45 GMT, also the pairs highest point since December 4th, after which the cross closed at 0.9052 on Friday, rising 0.70% for the day. On a weekly basis USD/CHF recorded an advance of 1.52%. Support was likely to be received at January 2nd low, 0.8908, while resistance was to be met at December 4th high, 0.9076.

The Federal Reserve said on December 18th that it plans to reduce its monthly bond purchases in January to $75 billion from $85 billion, while also reinforcing its position that the benchmark interest rate will remain low for an extended period of time. According to the median estimate of economists surveyed by Bloomberg on December 19th, the Federal Reserve may reduce the purchases in $10 billion increments over the next seven meetings, before ending the program, which tends to devalue the US currency, in December 2014.

However, Federal Reserve Bank Chairman Ben Bernanke said yesterday that any decision to scale back the 75 billion USD in monthly asset purchases should not be interpreted as a signal that a tighter policy was on the horizon.

“It is important to recognize that the potential signaling aspect of asset purchases depends on the broader economic and policy context. In particular, the Fed’s decision to modestly reduce the pace of asset purchases at its December meeting did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed”, Chairman Ben Bernanke said in prepared remarks of a statement he took at an economics conference in Philadelphia on Friday.

On Thursday the Department of Labor in the United States reported that the number of people, who filed for unemployment assistance during the week ended December 28th, dropped to 339 000 from the upwardly revised 341 000 in the preceding week. Analysts had projected that the number of initial jobless claims will increase to 342 000.

In addition, according to data by the Institute for Supply Management (ISM), US companies operating in the sector of manufacturing increased their activity at a weaker but still steady rate in December compared to November. The corresponding index, gauging the performance of manufacturing sector in the country, came in at a value of 57.0 in December, down from 57.3 in the previous month, which was also the highest level of the index in 2.5 years. Analysts had forecast that the manufacturing PMI will demonstrate a larger drop in December, to 56.9.

During the week ahead investors attention will be focused on the minutes of Federal Reserve Banks recent policy meeting, as it may provide clues over banks future policy course. Additionally, on Friday the United States will release the highly anticipated non-farm payrolls report for December.

USD/CHF cross may be influenced by a number of reports, scheduled for publication during next week, as follows:

On Monday (January 6th) the Institute for Supply Management (ISM) is to reveal the performance of its non-manufacturing PMI for the United States in December.

On Tuesday (January 7th) the United States will release a report on its trade balance for November, an indicator reflecting the difference between nations exports and imports.

On Wednesday (January 8th) Automatic Data Processing Inc. (ADP) will report on the employment change in the United States non-farm sector for December.

At 19:00 GMT the Federal Reserve Bank will release the minutes of its policy meeting on December 17th-18th.

On Thursday (January 9th) the United States will publish its weekly report on initial jobless claims regarding the week ended on January 4th.

On Friday (January 10th) Switzerland will release a report on the unemployment rate for December, followed by a separate report on consumer price inflation during the same month.

At 13:30 GMT the Bureau of Labor Statistics in the United States will report on non-farm payrolls and unemployment rate for December. The median estimate of experts showed that private sector in the country probably added 193 000 new job positions in December, after a month ago US economy added 203 000 jobs. At the same time, the rate of unemployment probably remained unchanged at 7.0% in December.