Dollar recovers mildly towards the end of the week as supported by comments from Fed officials. Fed chair Janet Yellen said that the economy is "doing quite well" and there are no serious short term obstacles. She noted "unemployment has now reached a low level, the labor market is generally strong and wage growth is beginning to pick up." Inflation has moved up and is "pretty close" to 2% target. Chicago Fed president Charles Evans expected that president-elect Donald Trump’s stimulus policies to "increase growth by a couple of tenths over the next two years." And policymakers "look forward to refining that when we actually see proposals that are moving forward and likely to be implemented." A improvements in the economic outlook materializes, US would need "less accommodation". He also said earlier in the month that three rate hikes this year is "not implausible".

Philadelphia Fed president Patrick Harker said that the US economy is "starting 2017 off on a good foot". He noted that "the labor market is strong, and we’re creating jobs at a good pace." Besides, "inflation is moving back up to our 2% goal and growth is solid." And Harker believed that "three modest rate hikes" are "appropriate for the coming year" if the economy stays on track. On the other hand, St. Louis Fed president James Bullard thought that president-elect Donald Trump’s policies will not have much impact this year. And Bullard believed that one hike is appropriate. Nonetheless, he also noted that Fed "may be in a better position" to reduce the size of its balance sheet.

Released from China, trade surplus narrowed to USD 40.8b in December, smaller than expectation of USD 47.6b. Exports rose 6.1% yoy while imports rose 3.1% yoy. In CNY terms, trade surplus widened to CNY 335b versus expectation of CNY 345b. Exports dropped -2.0% yoy while imports rose 2.7% yoy. Japan M2 rose 4.0% yoy in December. Looking ahead, European calendar is empty today. US will release retail sales, PPI, business inventories and U of Michigan sentiment later in US session.

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.0078; (P) 1.0162; (R1) 1.0224; More…..

USD/CHF breached 1.0056 support brief but quickly recovered. Intraday bias stays neutral first as consolidation from 1.0342 is still in progress. At this point, we’d still expect downside to be contained by 1.0019 support and bring rally resumption. Firm break of 1.0342 will confirm up trend resumption. However, sustained break of 1.0019 will indicate near term reversal and could bring deeper fall bring to 0.9443/9548 support zone.

In the bigger picture, the corrective fall from 1.0327 should have completed at 0.9443 already. Rise from 0.9443 could be resuming the long term rally from 2011 low at 0.7065. But decisive break of 1.0327 is needed to confirm. In that case, next medium term upside target will be 38.2% retracement of 1.8305 to 0.7065 at 1.1359. Rejection from 1.0327 will extend the sideway pattern with another fall back to 0.9443/9548 support zone.

Economic Indicators Update

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