Outlook for USD/CHF during the upcoming week

US dollar slumped to lows unseen in three weeks against the Swiss franc on Friday, as demand for safe haven franc received a boost due to deepening selloff in emerging-market currencies.

Having fallen to its lowest point since December 31st at 0.8904 at 11:30 GMT on Friday, USD/CHF ended the week at 0.8944, losing 0.32% for the day, while the weekly loss was 1.82%. Support was likely to be received at December 31st low, 0.8868, while resistance was to be met at January 24th high, 0.8992.

On Friday the Argentine peso tumbled 1.5% against the US dollar, after recording its largest decline in 12 years on Thursday, as nation’s central bank reduced attempts to support national currency with dollar sales. In addition, the Turkish lira depreciated 1.9% versus the greenback, while the Russian ruble registered a 1.3% decrease. South African rand dropped 0.9% and Indias rupee fell 1.2%.

“This weakness that we’ve seen in EM currencies appears to be contributing to strength in traditional safe-haven Group of 10 currencies, like the yen and Swiss franc,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said, cited by Bloomberg News. “The price action in recent days tells you that the potential for contagion has not been diminished.”

On the other hand, demand for the US dollar was underpinned by the most recent string of overall optimistic reports, which boosted the view of further cuts in Federal Reserve’s monthly monetary stimulus.

The Bureau of Labor Statistics reported on Thursday, that the number of initial jobless claims in the United States rose by 1 000 to 326 000 in the week ended January 18th, from a revised down number of 325 000 during the previous week. Analysts had expected that the people who filed for unemployment assistance will increase to 330 000.

A separate report said that existing home sales in the country increased 1.0% to the annualized 4.87 million units in December, following a three-month streak of declines. According to data by the National Association of Realtors (NAR), existing home sales reached a seven-year high in December 2013 compared to December 2012.

During the whole 2013 sales increased to 5.09 million units, or a 9.1% gain in comparison to the whole 2012. Experts had anticipated that existing home sales will reach the annualized 4.93 million units in December. November’s result has been revised down to 4.82 million from 4.90 million previously.

Meanwhile, also on Thursday, Switzerland’s government announced that an agreement has been reached, as a response to Swiss National Bank’s request, to raise the level of capital, which banks must hold to support mortgage lending, in order to curb the boom in nations housing sector.

In the week ahead investors attention will be focused on the outcome of Federal Reserve Banks two-day meeting on policy, with expectations pointing a reduction in banks asset purchases to 65 billion USD per month from the current pace of 75 billion USD.

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

On Monday (January 27th) the Census Bureau in the United States is to report on the number of new home sales in December, a crucial indicator for activity in nations housing sector.

On Tuesday (January 28th) the United States will release a report on durable goods orders for December, a vital indicator for production in the country, followed by a report by S&P and Case-Shiller regarding home prices in 20 large cities in the United States.

At 15:00 GMT the Conference Board research group will announce the results of its survey on consumer confidence in January.

On Wednesday (January 29th) the Federal Open Market Committee (FOMC) is expected to announce its decision on interest rates and monthly bond purchases, accompanied by a statement on monetary policy.

On Thursday (January 30th) Switzerland will release its KOF leading indicator for January, which is based on three separate modules – core GDP (excluding construction and banking sectors in the country), banking module and construction module.

The Department of Labor in the United States will release its weekly report on initial jobless claims regarding the week ended on January 25th. A separate report will show the pace of US preliminary Gross Domestic Product in the fourth quarter compared to Q4 2012. Economy probably expanded 3.2% in Q4 2013, following a 4.1% growth in the preceding quarter.

At 15:00 GMT the National Association of Realtors (NAR) will publish its index of pending home sales in the country for December, an indicator for future housing market activity.

On Friday (January 31st) the United States will report on the Core personal consumption expenditures (PCE) price index for December, followed by a separate report on manufacturing activity in the region of Chicago for January.

At 14:55 GMT the University of Michigan in cooperation with Thomson Reuters will announce the final reading of their index of consumer confidence in January.