Two-month low: USD/CHF Price Forecast points to bullish structure at risk

0.8127 rebound lifts USD/CHF back above the 100-day SMA at 0.8159.
Despite a bearish RSI, the sequence of higher highs and higher lows remains unbroken.
Below 0.8127, USD/CHF faces 0.8100, then the 200-day SMA at 0.8000.

USD/CHF is down 0.45% at 0.8172. Losses deepened during the North American session after the pair touched a two-month low of 0.8127 earlier in the day. Traders sold the US Dollar, opting instead for other safe-haven assets such as the Swiss Franc and Japanese Yen.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

0.8227 in Focus: USD/CHF Technical Price Outlook

A break of the previous support trendline has left the market structure neutral with a bullish bias. Since slipping below the 50-day Simple Moving Average (SMA) at 0.8227 last Monday, USD/CHF has traded in a consolidation range bounded by that level and the 100-day SMA at 0.8159.

Successive higher highs and higher lows continue to define the USD/CHF market structure, despite the Relative Strength Index (RSI) shifting into bearish territory.

A recovery requires buyers to lift USD/CHF above the 50-day SMA at 0.8227. Clearing that hurdle could bring a return to the 28 October swing high of 0.8313 into play. A break above it would put the 14 October high of 0.8395 next in line, with 0.8400 immediately beyond.

For further downside, sellers need to force USD/CHF through the session low of 0.8127. They would then target a break below 0.8100, opening the way towards the 200-day SMA at 0.8000.

USD/CHF Daily Price Chart

Swiss Franc: Key Questions Answered

Swiss Franc: Main Currency Drivers

Switzerland’s official currency, the Swiss Franc (CHF), ranks among the ten most actively traded currencies worldwide. Trading volumes far exceed the size of the Swiss economy. Broad market sentiment, domestic economic conditions and decisions by the Swiss National Bank (SNB) are among the factors shaping its value. From 2011 to 2015, the Swiss Franc was pegged to the Euro (EUR). The sudden removal of that peg sent the Franc more than 20% higher and triggered market turmoil. Although the peg no longer applies, the Swiss economy’s heavy reliance on the neighbouring Eurozone means CHF movements still tend to track those of the Euro closely.

Swiss Franc: Safe-Haven Status

Investors tend to buy the Swiss Franc (CHF) when markets come under stress, giving it the status of a safe-haven asset. This reflects perceptions of Switzerland’s economic stability, robust export sector, substantial central bank reserves and longstanding political neutrality in global conflicts. Together, these attributes make its currency attractive to investors seeking to avoid risk. During periods of turbulence, CHF is likely to appreciate against currencies regarded as riskier investments.

Swiss National Bank: Policy Impact on the Franc

Monetary policy decisions are taken by the Swiss National Bank (SNB) four times a year, once each quarter, a lower frequency than at other major central banks. Its objective is to keep annual inflation below 2%. If inflation exceeds the target, or is forecast to do so in the foreseeable future, the bank will seek to curb price increases by raising its policy rate. Higher rates usually support the Swiss Franc (CHF): they lift yields and increase Switzerland’s appeal to investors. Lower rates, by contrast, tend to put pressure on CHF.

Swiss Economic Data: Implications for the Franc

Switzerland’s macroeconomic releases help investors gauge economic conditions and can alter the valuation of the Swiss Franc (CHF). Despite the economy’s general stability, abrupt shifts in growth, inflation, the current account or the central bank’s currency reserves can prompt CHF moves. Strong growth, low unemployment and elevated confidence generally support the currency. Data signalling a loss of economic momentum, however, is likely to weigh on CHF.

Eurozone Monetary Policy: Links to the Swiss Franc

Switzerland’s small, open economy relies heavily on the performance of its Eurozone neighbours. The wider European Union is its leading economic partner and an important political ally. Stability in Eurozone macroeconomic conditions and monetary policy is therefore crucial to Switzerland and, in turn, the Swiss Franc (CHF). Reflecting that dependence, some models put the correlation between movements in the Euro (EUR) and CHF at more than 90%, close to a perfect correlation.