USD/CHF Price Forecast: Bulls need a break above 0.8200 to regain momentum
- USD/CHF bounces back above 0.8100 after finding support near the 50-day SMA.
- Weak ADX and neutral RSI readings suggest the pair may stay range-bound in the near term.
- Failure to hold the 50-day SMA could expose the 0.8000 mark.
USD/CHF rebounds on Monday as the US Dollar (USD) recovers from its early losses. At the time of writing, the pair trades around 0.8112 after touching an intraday low of 0.8072, its lowest level in over a week.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 99.60 after recovering from 99.30, its lowest level since June 5.
Analysts at MUFG/BTMU point out that the Dollar index “has not yet tested support from the 200-day moving average, which comes in at around 99.20,” underscoring that the broader gauge of Dollar strength is still trading above a key technical level. At the same time, they note that “the run of softer US economic data has encouraged market participants to scale back Fed rate hike expectations,” suggesting that the fundamental backdrop for sustained Dollar strength is becoming less supportive.
From a technical perspective, USD/CHF retains a mild bullish bias after reclaiming the key moving averages and the 0.8000 psychological mark in early June. However, price action has since turned largely sideways as momentum indicators soften.
The Relative Strength Index (RSI) on the daily chart stands near the neutral 52 level, while the Moving Average Convergence Divergence (MACD) indicator hovers slightly below zero. The Average Directional Index (ADX) at 16 also points to weak trend strength, inting at a consolidative tone rather than a decisive trend continuation.
On the upside, initial resistance is located at the 0.8150 horizontal level, followed by the stronger 0.8200 barrier. A sustained break above 0.8200 could restore bullish momentum and open the door to additional gains.
On the downside, the 50-day Simple Moving Average (SMA) at 0.8082 offers immediate support, followed by the 0.8000 psychological mark. A break below this area would expose the 100-day SMA at 0.7974 and the 200-day SMA at 0.7932.
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.
