USDCHF Analysis (Dec, 2021) Job Market Rising
The economies across the world have all been impacted by the various coronavirus variants. One of the methods companies have tried to combat this is through home working.
Consumers are now spending more time than ever at home, causing more and more people to either do work on their homes or look for new homes to live in! Employees now have more power with remote working allowing them to choose and negotiate better benefits when being employed, increasing salaries are also contributing to the rise in demand for homes.
"Sales likely increased due to a strengthening job market and concerns among potential buyers that mortgage rates will be significantly higher next year, according to the NAR’s chief economist Lawrence Yun." - CNBC
What we're seeing overall on a fundamental level is a potential upside movement brewing for USDCHF... however, we'll need to keep track of the upcoming weeks of economic data to see whether the fundamentals align.
Logikfx Technology Summary
The technology summary shows that overall USDCHF is looking bullish... what we need to keep an eye on however is that we can see there is a bearish signal on the GDP differentials.
Lets take a look at the overall relative analysis including trade analysis, stock market analysis, technical analysis and market sentiment.
Macro Currency Strength Meter
One of the key areas of interest on the macro currency strength meter is that currently CHF has had declining economic data releases over the past month suggesting a bearish CHF. On the flip side the USD has maintained a strong economic stand point.
Here we'd like to keep an eye on both lines to make sure we have this divergence in economic data, it would be great if USD economic releases started to show bullish signs as this may signal a start of a reversal on USDCHF.
GDP Differentials
The GDP differentials was one of the bearish economic indicators identified... why is that?
Currently, we are seeing a forecast GDP growth rates of 3.5% for the United States in comparison to a 3% growth rate for Switzerland. Although, the gap between the GDP growth rates is still greater for US it's actually tightening suggesting downwards pressure on the USD.
What we may see in the long term is a potential downtrend actually forming unless the IMF change their forecasts to be more bullish for USD and CHF.
Trade Analysis (Imports/Exports)
Exxon Mobil is one of United States largest oil manufacturers. What we've found across 20+ years of data is that Exxon is negatively correlated to USDCHF. This means as Exxon prices rise USDCHF goes down and vice versa.
Most recently what we've seen is Exxon prices slowly rising with USDCHF hovering and congesting.
What we're ideally looking for at this point is Exxon prices to fall which would suggest USDCHF rising and aligning with the fundamentals identified by the currency strength meter.
Gold prices are another commodity/ company with a negative correlation to USDCHF. In this case what we've seen is gold prices slowly rise over the past 20 years nearly quadrupling in value. In this same period we've seen the value of the USD fall significantly.
Now that we're seeing gold prices rise again we're actually seeing a clash in fundamentals and our trade analysis.
This suggests overall, our idea may be too early and what we should be doing is keeping a close eye and adding this to a watchlist... be patient and waiting for more confident economic signs.
Interest Rate Differentials
The interest rate differentials for United States against Switzerland have been positive since 2015.
This is slightly bullish for investors as it shows they'll be earning more interest on their cash held in dollars rather than Swiss Francs.
Inflation is rising rapidly and the federal reserve may start to increase rates which could widen this gap and create a stronger conviction for an upside on USD.
Stock Market Analysis
The S&P500 is a barometer of economic health within the United States, what we've seen is that the index tracks the performance of the top 500 companies. Pricing this index in CHF we can see relatively how much poorer or wealthier residents in the US are becoming in comparison to the Swiss demographic.
In this case we've seen the US stock market rise significantly suggesting a potentially bullish move in USDCHF.
Hedge Fund Positioning
The hedge fund positions are shown using the COT report and more specifically our Commitment of Traders Analysis (COTA) tool. This shows the open interest of hedge funds buying or selling the selected currencies.
In this we cans see hedge funds are buying the USD and selling the CHF...
However, we'll need to keep a close eye on this indicator as it looks like they're actually starting to close their long positions in USD and short positions on the CHF as identified by the gap tightening.
What we'd prefer is a rising green line which would indicate the gap between open interest widening and the idea would be with hedge fund sentiment.
Price trends
The price of USDCHF over the past year has actually been on an upwards trend...
What we've seen is the USDCHF exchange rate respect a continuous upwards trajectory and now hitting a correction point.
We've highlighted a potential area of support which may be reached where buyers look to be bullish on USDCHF...
One to keep an eye on as not all the economic indicators were confirming so we'll monitor this position to see if it needs to be moved from our watchlist or not.
