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After a weak second half of 2016, Swiss companies have made a better start in 2017, especially in the cyclical and financial sectors. The fundamentals in Switzerland remain strong with an unemployment rate just above 3% and GDP growth estimated to 1.5% for 2017 and 1.8% in 2018, compared with 0.8% and 1.29% reached in 2015 and 2016 respectively. According to leading indicators KOF and manufacturing PMI – both improving significantly - Swiss companies are also more optimistic. Europe is doing better both economically and politically, thus encouraging exports. The SNB reduced its interventions on foreign exchange market as confirmed by a slower evolution of sight deposits over the last few weeks. The euro - which regained strength since Emmanuel Macron’s win – could keep its upward trend if the ECB decides to toughen its language during the meeting taking place this Thursday, 8 June.
The Swiss Performance Index (SPI) less impacted by a strong franc recently reached a historical high, and the SMI could follow this path. The SMI has indeed broken the psychological level of 9,000 by reaching a new 52-week high in the middle of May. Trend indicators are significantly bullish with 20-week (100 days) and 40-week (200 days) simple moving averages still increasing, and the Ichimoku cloud oriented upward. The strength of this trend remains intact as shown by the RSI and the MACD, both showing an upward trend and in positive territory since the end of 2016.
Following the post-Macron rally, the index consolidates slightly and the downmove could extend in the short-term towards 8,700, a major support level that should attract potential buyers. Indeed, we can find the 61.8% Fibonacci retracement at 8,732, the March high and the pivot point at 8,715, as well as the 100-day mobile average a little lower, at 8,688. If this level holds, we can consider a rebound towards the 2015 high at 8,550 in the first place, then 10,200, the 161.8% Fibonacci extension level. A break (on a weekly close) below 8,700 could however pave the way to 8,300, the 2016 upper channel line.