Ahead of the weekend there has been little to keep alive the volatility from yesterday. Calendars on both sides of the Atlantic are bare and it has been this sparse event-risk that has prolonged the consolidation phase to encompass the European morning. The late Asian bounce off 1.2557 in USD/CHF worked the pair to 1.2594 into early European trading.
However, continued selling from model accounts in various reasonable sizes kept the price from testing 1.2700. This failure combined with a slight CHF relief-rally, in the wake of the marginally better than expect Swiss Producer & Import data, forced spot to ease.
However, until a break below 1.2550 is seen USD/CHF is likely to trade inside the new 1.2550/2600 comfort-zone. Looking ahead, the US FOMC meeting next week is set to hold the broader market focus going forward.
The fall in US inflation has seen the risk of a further hike from the Fed ease, however, with no cut on the table yet for early 2007 the Dollar remains modestly supported. London players look for USD weakness ahead of the verdict with 1.2400 eyed a target.
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