USD/CHF Price Forecast: Bulls defend 50-day SMA as rebound builds
- USD/CHF rebounds from weekly lows, keeping bullish structure intact.
- RSI turns higher, hinting at recovery despite bearish territory.
- Break below 0.8010 would threaten 0.8000 and SMA supports.
The USD/CHF bounces off weekly lows and meanders around 0.8080 after hitting a daily high of 0.8127, amid presumed intervention, with Nikkei reporting that the US Treasury Department has told currency market participants to prepare for additional intervention, following Thursday's action by Japanese authorities to boost the Yen.
USD/CHF Price Forecast: Technical outlook
The USD/CHF rebounded, reaffirming its upward bias. The market structure suggests the uptrend will continue as long as spot prices remain above the 50-day SMA and the July 10 cycle low of 0.8010.
The Relative Strength Index (RSI) is turning bearish, aiming upwards, an indication that a recovery may be on the cards. This, along with price action confirming that the uptrend is in play, suggests that further upside is the path of least resistance.
To resume a bullish trend, USD/CHF must break above 0.8100. Beyond this level, the high of July 30 at 0.8175 is the next target, followed by 0.8200. If the price convincingly breaks through, the yearly high of 0.8207 could be within reach.
A move below the 50-day SMA and 0.8010 would signal a potential break of 0.8000. Such a move could disrupt the bullish market structure and lead to further declines. The next support levels are the 100-day SMA at 0.7952 and the 200-day SMA at 0.7927.
USD/CHF 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.
