USD/CHF Price Analysis: Climbs to five-week high above 0.9000
- USD/CHF continues to advance as bulls gain momentum.
- Next resistance levels: psychological 0.9050, followed by 0.9100 and May 24 high of 0.9158.
- Key support levels: 50-DMA at 0.9029, followed by the 0.9000 figure and 100-DMA at 0.8982.
The USD/CHF extended its rally for the second consecutive trading day after registering gains of 0.47% on Monday. It traded at 0.9042 on Tuesday, above its opening price of 0.20%.
USD/CHF Price Analysis: Technical outlook
The USD/CHF resumed its uptrend after a pullback dragged the exchange rate to a three-month low of 0.8826. Since then, the Greenback has staged a recovery, as the pair has rallied more than 2.20%, surpassing key technical levels on its way north, like the 200-day and 100-day moving averages (DMAs), each at 0.8895 and 0.8982, respectively.
Momentum supports buyers, as depicted by the Relative Strength Index (RSI).
On further USD/CHF strength, the pair could challenge the 0.9050 psychological level. Once cleared, the next stop would be 0.9100, followed by the May 24 high of 0.9158.
Conversely, the USD/CHF first support would be the 50-DMA at 0.9029. If surpassed, up next would be the 0.9000 figure, ahead of challenging the 100-DMA at 0.8982.
USD/CHF Price Action – Daily Chart
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.
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