USD/CHF Price Forecast: Two-month low threatens bullish structure
- USD/CHF rebounds from 0.8127, reclaiming 100-day SMA at 0.8159.
- Bearish RSI contrasts with still-intact higher-high and higher-low market structure.
- Break below 0.8127 exposes 0.8100 and 200-day SMA at 0.8000.
The USD/CHF extended its losses during the North American session, hitting a two-month low of 0.8127 earlier in the day as traders dumped the US Dollar in favor of other haven assets like the Swiss Franc or the Japanese Yen. Consequently, the pair edges down 0.45% and trades at 0.8172.
USD/CHF Price Forecast: Technical outlook
Even though a previous support trendline was broken, the market structure is neutral to bullish-biased. The USD/CHF fell below the 50-day Simple Moving Average (SMA) at 0.8227 last Monday and has since consolidated between that level and the 100-day SMA at 0.8159.
The Relative Strength Index (RSI) turned bearish, but the USD/CHF market structure of successive higher highs and higher lows remains intact.
For a bullish recovery, buyers must push USD/CHF above the 50-day SMA at 0.8227. In that outcome, the potential move back to the October 28 swing high of 0.8313 is on the cards. Once breached, the next stop is the October 14 high at 0.8395, immediately followed by 0.8400.
On the downside, bears must push the USD/CHF below the day’s low of 0.8127. After this, sellers would look for a push below 0.8100 on its way towards the 200-day SMA at 0.8000.
USD/CHF Price Chart – Daily
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.