USD/CHF remains muted on Friday, but the pair is trading below 0.8000, poised to end the week with modest gains above 0.25%. At the time of writing, the pair is trading at 0.7956, largely unchanged.
USD/CHF Price Forecast: Technical Outlook
The USD/CHF pair continued to consolidate this week. Although traders face touch resistance at the confluence of the 20- and 50-day Simple Moving Average (SMA) at 0.7974/84, a breach of the latter could propel the pair towards 0.8000.
Momentum is bearish as depicted by the Relative Strength Index (RSI) meandering below its 50 neutral level.
For a bearish continuation, traders need to clear the October 17 swing low of 0.7873. If exceeded, the next support would be the annual low of 0.7829. Conversely, if USD/CHF climbs above 0.8000, the first resistance will be the 100-day SMA at 0.8022, followed by the October 8 high at 0.8076 and the 0.8100 figure.
USD/CHF Price Chart – Daily
Frequently Asked Questions About Swiss Francs
The Swiss franc (CHF) is the official currency of Switzerland. It is among the ten most traded currencies globally, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by, among other things, broad market sentiment, the country’s economic health or actions taken by the Swiss National Bank (SNB). 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 turmoil in the markets. Although the peg is no longer in effect, CHF assets tend to be highly correlated with the euro due to the high dependence of the Swiss economy on the neighboring eurozone.
The Swiss Franc (CHF) is considered a safe haven or a currency that investors tend to buy during times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, large central bank reserves or a long-standing political stance of neutrality in global conflicts make the country’s currency a good choice for investors fleeing risks. Turbulent times are likely to strengthen the CHF value against other currencies seen as riskier 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 annual inflation of less than 2 per cent. When inflation is above the target or is expected to be above the target within the foreseeable future, the bank will try 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 interest rates, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can affect the Swiss franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or central bank foreign exchange reserves has the potential to trigger movements in the CHF. In general, high economic growth, low unemployment and high confidence are good for the CHF. Conversely, if economic data points to weakened momentum, the CHF is likely to fall.
As a small and open economy, Switzerland is highly dependent on the health of its neighboring Eurozone economies. The wider European Union is Switzerland’s most important economic partner and an important political ally, so macroeconomic and monetary stability in the euro area is crucial for Switzerland and thus for the Swiss franc (CHF). With such dependence, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.