07-25-2017: September SwissFranc: U.S. Government Ineffectiveness Pushes Dollar Exchange Rate Lower Against All Currencies

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calend Spread

Level Table
Other Factors
Recommendation

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Introduction

4 While the Swiss Franc appears poised to go higher, the signals are very weak. Going higher would be based upon two things, one that a move in commodities once underway generally travels fathewr than most think it will. The other is entirely dependent upon weakness in the U.S. economy which is being anticipated as a result of Republican ineffectiveness in Congress. If Republicans finally somehow manage to get their act together, the stock market and other rallies which have been based upon speculation their plans would be good for the economy could turn the rise in other currencies versus the Dollar around. This makes trades in currencies extremely risky right now, if betting against America. On top of that, many analysts, especially Swiss ones, view the Franc as way over-valued now, and riding on the coattails of a stronger Euro. We have to go with our "system" to predict a higher Franc, but it is risky, and the Swiss National Bank is working against that bet.


Intermarket Analysis

We fed Kansas wheat, Chicago wheat, and soybeans into a neural network to get the following result:




Parabolic Chart

September SwissFranc:

Parabolic Chart


Nirvana Chart

September SwissFranc:

Initial Chart


News Analysis

Spillover buying into the Franc from the Euro is occurring. Economic reports from the U.S. remain weak. Markets won't let go of a concern that Obamacare without a replacement will dramaticallyi increase the headwinds for the U.S. economy. The Republican healthcare debacle is punishing the U.S. Dollar and there is now a divergence between the pace of the Euro Zone economy versus the U.S. economy. Inflation concerns in the Euro Zone surfaced during the past week. Unemployment rates could fall there more than expected. Thus a more hawkish tone is coming out the European Central Bank, and suggesting a tightening cycle increase. The beginning of a longer-term uptrend pattern in the Swiss Franc is anticipated, with threats of an eventual interest rate tightening move in both the EuroZone and by the Swiss National Bank.

ECB President Mario Draghi said that financing conditions remain broadly supportive and that the Euro's appreciation had "received some attention." Howver, he did not cite that strength as a problem nor did he directly talk the currency down. Ostacles to U.S. President Trump's policy agenda weighed heavily upon the U.S. Dollar in exchange rate against all currencies.

The European Central Bank is expected to taper its bond-buying stimulus later this year. The Eruo and related Swiss Franc currencies have seen a second straight weeklly rise against the U.S. Dollar. The ECB will "stay the course" toward tightening monetary policy most believe. Possible Russian meddling with the U.S. election and Trump Administration collusion with Russia are viewed as obstacles to that administration's pro-growth agenda and are negative for the Dollar. Latest political news says the Russian investigation in the U..S. is expanding to Trump's business affairs. This is on top of Senate ineffectiveness.

The Swiss National Bank has been engaging in a policy that can best be described as "containment", and the Swiss Franc is losing its appeal as a safe haven currency. The Europ/Swiss Franc spread is becoming more risk on than risk off. EuroZone monetary policy is more likely to show tightening before Switzerland's.

The Swiss Franc has soared ever since the SNB has abandoned its policy of an exchange rate cap against the Euro.

There is an upcoming U.S. Federal Reserve meeting on July 26th at 2 P.M. EDT. While there is almost a 100% probability rates will remain unchanged at that time, there is still experctations the U.S. Fed will raise rates one more time before the end of the year, likely in October. U.S. consumer confidence measurements by the Conference Board remain paradoxical as disappointing sales have not decreased confidence levels as much as expected. Any rate hikes in Europe will have a magnified effect in the face of stable oil prices and U.S. Dollar weakness.

The head of the Swiss National Bank, Thomas Jordan admitted that the central bank has no quick fix solution to the problems a strong currency is causing the country. He believes the Swiss Franc is "significantly overvalued." While the SNB gave up defending its EUR/CHF floor at 1.20 last January, it was not long before it began to regularly intervene in foreign exchange markets to weaken its own currency in order to support Swiss exports. In February, 2017, the Swiss watchmakers' federation reported that exports of Swiss watches was down a further 10% on a year earlier.

As early as mid-2016 several news agencies reported that the SNB was expected to keep rates "on hold" until at least mid-2017. The Swiss Franc exchange rate gainst both the U.S. Dollar and the Euro has remained defiantly stout regardless of headwinds. Consumer spending in Switzerland is expected to extend into next year as improvements in export performance and investment are evident. There is pressure to head more toward parity between the Swiss Franc and the Euro. The SNB policy of keeping the Swiss Franc weak is still very much in play.

The election of Emmanuel Macron in France evaporated a lot of electoral risk in currency exchange there and supported the Euro. Initially, this caused the Swiss Franc to step lower against the Euro. The main feature in the Swiss Franc commodities future seems to be U.S. government ineffectiveness punishing the Doillar against all currencies.


Point & Figure Chart

133.0I                                                                  T  7/21
     I IMM - Sep-17 Swiss Franc, 125000 fr, c/fr   Cm.=0.03  Lim.= 0.3
     I
     I
     I
128.0I____X____________________________________________________________________
     I    X
     I    X
     I    X
     I    X
123.0I____XOX__________________________________________________________________
     I    XOXO
     I    XOXO
     I  X XO O
     IX XOX  O
118.0IXOXOX__O_________________________________________________________________
     IXOXOX  O
     IXO OX  O
     IX  OX  O
     I   OX  OX
113.0I___OX__OXOX______________________________________________________________
     I   OX  OXOXO
     I   OX  OXOXOX
     I   OX  OXO OXO
     I   OX  OX  OXO
108.0I___OX__OX__OXO____X______________________________________________________
     I   OX  OX  OXO    XO
     I   OX  OX  O O  X XOX
     I   OX  OX    O  XOXOXOX
     I   OX  O     OX XOXOXOX
103.0I___O_________OXOXO_O_OX__________________________________________________
     I             OXOX    OX
     I             O O     OX
     I                     OX
     I                     O
 98.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
                    1      1
      91261111356788212235803
      20201122121022020231122
      08855613829217398907807
The above chart is giving a conventional sell signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical high and a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "LSS3Day" It is giving a buy signal..

Internal Printout 1

Results of "LSS3Day" for Swiss Franc (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a sell signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $1,250. Initial margin on a single contract is $3,438. Use of options is advised.


Historic Range

If we eliminate the "blip" in 2011, then Scale trade sellers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-short.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to down is imminent near a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) Swiss Franc 102 Call @ 0.035 or less


o 1 o 3 o 5


Calendar Spread

What the Sep. - Mar. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up in the long run. The best time to enter or leave the above spread is when it is at -1.00 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -1,80 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be at tje sell the far, buy the near point.





Level Table:

Level Table

The path of least resistance is up.
108.0|                                                                  R  7/21
 IMM - Sep-17 Swiss Franc, 125000 fr, c/fr   Cm.=0.03  Lim.= 0.3
     |
     |
     |BC
107.0|BC_______________________________________________________________________
     |BC
     |BBC
     |BBBCCH
     |AAABBCCCH
106.0|AAABBCCCCH[   <<<
     |AAAABCCCDEH[
     |AAABCCCDDEEEEEH[
     |AABBCDDEEEEEH[[
     |AAABBBBBCDDDDEEEEEEEHZ[[
105.0|AABBBBCDDDDDDDEEEEEEFHHHZZ[______________________________________________
     |ABBBBCDDDDDDEEEEEFFHHHHYYZZ[
     |ABBCCDDDDDDDEFFFHHHHHYYYYYZ[
     |AABBCCDDDDDDEEFFFHHHHHHHWWXYYYZZZZ[
     |ABBBCCDDDEEEFFFFFHHHWWWXYYYYZZZZZZ[
104.0|AABCCCDEEFFFFHHHWXXXYYYYZZZZZZZZZ[_______________________________________
     |AAAACCFFFFHWWWXXXXYYZZZZZZZ[
     |AAACFFFHHVWWWWWXXXXYYYYZZZZ
     |AAFGHHHVWWWWXXXXYYYZZ
     |AAFFFFGGGGHHVVWWWWWXXXXXYYYY
103.0|AFFFFGGGGGHHHVVVWWWXXXXY_________________________________________________
     |AGGGHHJSVVVWXX
     |AGGGGGGJOSSVVVW
     |GGGGGGJJOOSSVV
     |GJJOOOSSV
102.0|GJJOOOOOORRSSUUV_________________________________________________________
     |JJJOOOOOOOORRRSUUUV
     |JJJNNOOOOOOOORRRRSSTUUUUV
     |JJJNNNNOOOOOOPPRRRRSTUUUUUUUUUV
     |JJKMNNNNNOOOOOOPPRRRRSSTTTUUUUUUUUUV
101.0|JJKKKKMNNNNNOOOPPPRRRSTTTTTUUUVV_________________________________________
     |JJJJKKKKKMNNNNNOPPPPPPQRSSTTUVV
     |JJJJJJKKKKKKLMNNNNNNPPPPPPPQRSSSSTTTVVV
     |JJJJKKKKKKLLMMNNNNNPPPPPQQQRSSSTTTTVVV
     |JJJKKKKKKLLMMMMNNNNPPPPQQQQQRRRSSSTTTTVV
100.0|JJJKKKKKKLMMMMMNNPPPPQQQQQQRRRSSTTTVVVV__________________________________
     |JKKKKKLMMMMMMNPPQQQQQQQRTVVVV
     |KKLMMMMMMQQQQQV
     |LLMMMMQQ
     |LLLLMMMMMM
 99.0|LLLLLLMMMM_______________________________________________________________
     |LLLLLLLMMMM
     |LLLLMMMM
     |LLMM
     |LM
 98.0|_________________________________________________________________________
     |
     |
     |
     |
 97.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.275
                 1 1 1 1 1 1 1                                        
       7 8 8 9 9 0 0 0 1 1 2 2 1 1 2 2 3 3 4 4 5 5 6 6 7 7           7
       2 0 1 0 1 0 1 3 1 2 1 2 1 2 1 2 1 2 1 2 0 2 0 2 0 2           2
       5 5 9 2 9 3 7 1 4 9 3 8 2 7 0 7 3 7 0 5 9 3 7 1 6 0           1


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 7/21 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                 SFU7    September Swiss Franc

                      High Price:  109.2
                   Current Price:  106.3
                       Low Price:  104.8

                            Risk:  0.028
                     Opportunity:  0.054

                    (O/R) Ratio =  1.933


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart + 1
Nirvana Chart - 1
News + 1
Point & Figure - 1
Cyclicals + 1
Seasonals - 1
Internal System 1 + 1
Internal System 2 0
Third System - 1
Historic Range 0
Commitment of Traders - 1
Range/Volatility - 1
Level Table + 1
Other Factors + 1
Total + 1
Place 4 September Swiss Franc on a Buy Watch with stoploss @ -0.96 below the get-in point when recent price is represented as "106.31".
____________________________________________________________________________________________________________________________________________C.T.