USD/CHF Price Forecast: Returns above 20-day EMA after almost a month

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The USD/CHF pair is up 0.15% to near 0.7765 during the European trading session on Friday, the highest level seen in over a week.

USD/CHF posts a fresh weekly high near 0.7765 amid a firm US Dollar.
FOMC Minutes showed on Wednesday that officials are not in a rush to reduce interest rates.
US-Iran tensions have improved the safe-haven demand of the Swiss Franc.

The USD/CHF pair is up 0.15% to near 0.7765 during the European trading session on Friday, the highest level seen in over a week. The Swiss Franc pair trades firmly as the US Dollar (USD) gains on expectations that several Federal Reserve (Fed) officials are unlikely to favor interest rate cuts in the near term.

During the press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near the four-week high of 98.00 posted on Thursday.

Federal Open Market Committee (FOMC) Minutes of the January policy meeting showed on Wednesday that officials see no hurry for interest rate cuts as the United States (US) inflation has remained above 2% for a longer period.

On the economic data front, investors await the preliminary US Q4 Gross Domestic Product (GDP) and the S&P Global Purchasing Managers’ Index (PMI) data for February, which will be released during North American trading hours.

Though investors have underpinned the US Dollar against the Swiss Franc (CHF), the latter trades broadly stable as the market sentiment remains slightly risk-averse due to tensions between the US and Iran.

USD/CHF technical analysis

USD/CHF trades higher at around 0.7765 at the press time. Price steadies just above the 20-day EMA at 0.7753, and the average has flattened after a multi-week decline. The moderating slope signals fading bearish pressure, though trend confirmation remains absent.

The recovery move in the 14-day Relative Strength Index (RSI) from below 30 to 49 indicates weakening of strength in the bearish momentum.

A sustained close above the 20-day EMA at 0.7753 would keep a recovery path open and could draw follow-through buying towards the February 2 high of 0.7818. Failure to hold the average would undermine the nascent base and reassert the broader downswing.

(The technical analysis of this story was written with the help of an AI tool.)

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.