USD/CHF: Trading the Swiss GDP

The Gross Domestic Product (GDP), a quarterly index which measures the production and growth of the economy, is one the most important economic indicators of the health of the economy. The publication of Swiss GDP may have a critical effect on USD/CHF.

Here are all the details, and 5 possible outcomes for USD/CHF.

Published on Thursday at 5:45 GMT.

Indicator Background

After several quarters where a robust Swiss GDP registered between .7% and .9%, the index dipped in May 2011 to a disappointing 0.3%, after a forecast of 0.6%. The forecast for the August release is a modest 0.4%.

In the past 18 months, the Swiss franc has risen by some 25% against the dollar and euro. It thus comes as no surprise that many currency analysts feel that the franc is greatly overvalued and due for a correction downwards.

Switzerland’s economy is very dependent upon exports, and this has led to fears that the strong Swiss franc could push the country into a recession, which would threaten economic stability and lead to a weaker Swiss franc.

Sentiments and levels

A weak GDP reading would cause the USD to rise at the expense of the CHF. Thus, the overall sentiment is bullish on USD/CHF towards this release.

Technical levels, from top to bottom: 0.8400, 0.8330, 0.8275, 0.8200, 0.8130, 0.8075, and 0.8000.

5 Scenarios

  1. Within expectations: 0.1% to 0.5%. In such a scenario, the USD/CHF is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.6% to 0.9%: An unexpected higher reading can send the pair well below one support line.
  3. Well above expectations: Above 1%: The chances of such a scenario are low. Such an outcome would push down the USD/CHF, and a second support line might be broken as a result.
  4. Below expectations: -0.3% to 0%:  A decrease in GDP could cause the pair to rise and gain one level of resistance.
  5. Well below expectations: Under -0.4%. Given the high franc and weak global economy, this outcome cannot be discounted. In this scenario, the USD/CHF will push up and could break a second resistance level.

For more about the USD/CHF, see the USD to CHF forecast.

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