Outlook for USD/CHF cross during the upcoming week

US dollar managed to climb to highs unseen in one week against the Swiss franc on trading Friday, after official data showed US housing starts decreased at a lesser pace than initially expected in December, marking the best year for the industry since 2007.

USD/CHF reached a session high at 0.9120 at 18:18 GMT, also the pairs highest point since January 9th, after which it closed at 0.9102 on Friday, rising 0.60% for the day. USD/CHF registered a 0.86% weekly advance. Support was likely to be received at January 16th low, 0.9032, while resistance was to be encountered at January 9th high, 0.9124.

Fed President for Richmond Jeffrey Lacker said in a speech on Friday that the central bank may consider scaling back the pace of its bond-purchasing program at the upcoming meetings, underscoring improving conditions in US labor market. Federal Reserve will probably continue to pare its monetary stimulus by $10 billion at each policy meeting before exiting the program in December, according to a Bloomberg News survey of 41 economists, conducted on January 10th. The Federal Open Market Committee is scheduled to meet next on January 28th-29th.

On Thursday data by the Department of Labor in the United States showed the number of initial jobless claims fell to 326 000 during the week ended January 11th, or the lowest number since November. Analysts had expected that people who filed for unemployment assistance will be 328 000, after their number has been revised down to 328 000 from 330 000 in the previous week.

On Friday it became clear that housing starts in the United States maintained a steady pace in December, which supported the view that nation’s housing market may be able to withstand a possible moderate raise in interest rates. Housing starts decreased 9.8% in December to the annualized 0.999 million sites, which considerably exceeded numbers reported last summer and also preliminary estimates, which pointed to an increase to 0.990 million sites. Housing starts in November have been revised up to 1.107 million sites, or the highest number in five years, from 1.091 million previously.

Building permits, an indicator for future construction activity in the country, dropped 3.0% to the annualized 0.986 million units in December from the revised up 1.017 million units in November (1.007 million units previously). This data suggested, that despite improving housing market conditions in 2013, constructors probably remained cautious.

However, US dollar pared its advance against major peers on Friday, after a survey by the University of Michigan and Thomson Reuters revealed that US consumers lost a bit of their optimism in early January, as households with low and medium income trimmed their financial expectations. The preliminary reading of the corresponding index of consumer confidence slowed down to 80.4 in January from a final reading of 82.5 in late December. Experts had projected that the index will demonstrate an advance to 83.5 during the current month.

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

On Monday (January 20th) markets in the United States will remain closed due to a national holiday.

On Wednesday (January 22nd) the ZEW (Zentrum für Europäische Wirtschaftsforschung) is to report on the index of economic sentiment regarding Switzerland in January. It represents the difference between optimistic and pessimistic forecasts about nations economic development during the next six months.

On Thursday (January 23rd) the United States will publish its weekly report on initial jobless claims, followed by a report by Markit Economics on the preliminary reading of US manufacturing PMI for January.

At 15:00 GMT the National Association of Realtors (NAR) will announce the level of existing home sales in the country for December.

Tuesday and Friday have been skipped, as no relevant events, concerning the United States and Switzerland, are scheduled on these days.