The Swiss Franc latest failure to break the 1.1 resistance against the dollar has proven once again that whenever the Swissie faces critical levels against the Dollar the market is willing to pay less and less for the Swiss currency. Since bottoming at the 0.97 level in March 2008 the Dollar Swiss trade has been gaining strong momentum. The USD/CHF pair has found support in the levels 1.00, 1.04, 1.115 and has formed a steady bullish trend.

It is somewhat clear that only deterioration in the fundamental outlook for the Swiss economy could generate such depreciation in the Swiss Franc. The Swiss economy is strongly exposed to the Euro zone as the EU posses the largest export market for the Swiss economy. As the EU economy shrinks the demand for Swiss goods and services declines and evidently brings the Swiss trade balance under pressure. In addition the Swiss banking sector which is one of the most important service export and source of cash inflows for the Swiss economy has been hit painfully by the crisis. The Swiss banking system still relies on government support and its relative advantage stands in jeopardy.

The conclusion that the intelligent investor must draw from this is that until the looming problems in the Euro zone and the banking sector will not be solved the smart money will not be flowing to the Swiss Franc. The USD/CHF is in a prolonged bullish momentum with 1.2 as its first target.

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