Fundamental Outlook for Swiss Franc: Bullish

- Swiss franc gains as carry trades falter
- Increased volatility boosts USDCHF trading opportunities

The lack of recovery in the credit market paired with narrowing demands for carry trades have certainly increased the appeal of the Swiss franc, and remains favorable in the week ahead as investors continue to curb their risk appetite. As the flight to safety continues, demands for the low-yielding currency may accelerate in the week ahead as fears of a global meltdown continues to build.

Meanwhile, increased talks by the European Union to overhaul the global financial system has also stirred concerns among investors as G8 leaders are scheduled to come together next month in order to develop a resolution to the financial crisis. During the summit, world leaders plan to reform regulatory standards for the financial sector, and have also stressed the importance of increased supervision of the global market. Despite the increased efforts by the G8, it will be exceptionally difficult for global leaders to reach an agreement as the severity of the credit crunch differs across the globe, but the news has certainly helped to ease fears. However, the uncertainties surrounding the financial sector as well as the global economy could spur price action for the Swiss franc in the near-term until a sound resolution is reached.

Over the following week, risk sentiment is likely to drive price action for the forex market, and the Swissie may once again turn a blind eye to the fundamental event risks scheduled for the week. With that said, the ongoing turmoil in the credit and stock markets should help to drive demands for the low-yielding currency, and we may see the Swiss franc pick up additional gains next week.

Jamie Saettele is a Technical Currency Analyst for FXCM.