Swiss franc remains on defensive

The kiwi tops the performance charts an hour into US trade, advancing more than 0.40% against the greenback. The pair has continued to trade between the 38.2% and 50% Fibonacci extensions taken from the June 16th and August 8th troughs at 0.8290 and the 0.84-handle respectively. Despite losses in equities across the globe, the kiwi has remained quite resilient in the face of risk aversion flows which have come to the benefit of the yen and the dollar. A breach above interim resistance eyes topside targets at 0.8450 and the 61.8% extension at 0.8490. Downside support holds at the 38.2% extension, with subsequent floors seen at 0.8250, the 0.82-figure, and the 23.6% extension at 0.8160. Overnight traders will be eyeing producer prices data out of New Zealand, with input and output prices expected to ease to 1.1% and 0.8% respectively.

Key Levels/Indicators

The swissie saw a brief reprieve of the heavy selling pressure seen over the past few sessions after the SNB vice president threatened to peg the franc to the euro in an attempt to stem the currencies rapid appreciation. However the selling pressure resumed early in North American trade as the franc plummeted against the greenback for the fourth consecutive session. Overnight weaker than expected GDP data out of Germany fueled concerns that the recovery in the EU region may be faltering. And with Germany seen as the main diver of growth in the region, investors have significantly scaled back exposure with European equities falling 1-2% across the board. While the swissie has been the haven play for uneasy European investors, the peg threat continues to see traders reluctant to take on franc positions, with the USD/CHF falling more than 0.53% early in US trade. The pair rebounded off the 61.8% Fibonacci retracement taken from the July 19th descent at 0.7813 before facing some headwinds ahead of former trendline support, now resistance at the 0.79-figure. A topside break eyes subsequent ceilings at the 76.4% retracement at the 0.80-figure, 0.8040, and 0.8080. Interim support holds at the 61.8% retracement, backed by the 50% Fib at 0.7670, the 0.76-handle and the 38.2% retracement at 0.7530. Although there is no Swiss economic data of note, investors anxiously await to hear from French President Nicolas Sarkozy and German Chancellor Angela Merkel who met today to discuss the ongoing debt crisis which continues to threaten stability in the European region.

Key Levels/Indicators

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
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