The USD/CHF currency pair this week convincingly broke through the top of its long term descending channel. This is a huge technical breakthrough that had been capping rallies since mid-August. This relatively large move could be an indication of increasing positive momentum for the pair, today trading around the 0.7950 support area. Traders have been closely watching this breakout. It dovetails entirely with the macro market forces at play, not least influenced by the Swiss National Bank’s (SNB) monetary policy of late.
The first upside target in USD/CHF is seen at 0.8170. This area is in line with late-July resistance and is a key supply zone. Analysts predict that should the breakout stick above this important level, it may pave the way for additional upside for USD/CHF. Both the 20 and 50-day simple moving averages (SMAs) are positioned beneath the price action. Of course, this constraining situation only increases the importance of maintaining strong momentum to carry the pair as far upward as possible.
Technical Analysis and Momentum Shift
The bullish breakout of USD/CHF represents a whole new momentum that traders have been waiting for. Even as the pair heads up and out of its previously formed descending channel, there are indications that bullish sentiment is reestablishing a foothold. The SNB’s more patient “wait-and-see” approach is central to this shift. It leaves the door open for more easing later this year.
Market participants are looking to the former resistance at 0.8170. If USD/CHF can hold above the SMAs, pundits expect it to tilt mildly higher towards this objective. There’s an inherent risk there. If we cannot hold above these averages, focus will turn to the support level at 0.7860, where buyers have been eager to step in previously.
USD/CHF are at bullish levels. A change in overall market sentiment would immediately move the needle on its trajectory. A dovish tone from the US central bank would push the USD/CHF lower. Against the Swiss franc, this would make the currency pair even more attractive.
Economic Factors Influencing USD/CHF
There are a number of economic factors influencing the outlook for USD/CHF. Perhaps the most remarkable element is the U.S. slapping down a 39% tariff on Swiss exports. As the tariff continues to weigh heavily on the currency pair’s interest rate outlook, the geopolitical backdrop continues to stoke volatility in a tumultuous trading environment. The market has largely yawned at recent events.
Further, consumer price inflation in Switzerland is still mostly subdued, coming in at only 0.2% YoY. This very low inflation rate poses a key question about the SNB’s ability to tighten monetary policy in the near future. Second, it poisons the inter-sovereign currency relations between the USD and USD. Therefore, their trader will be watching closely for any tick-up in inflationary pressure, labor market data, etc., coming out of Switzerland.
Technical indicators are pointing towards a USD/CHF test of the 0.8170 resistance zone in the near term. Both technical analysis and fundamental economic factors will be important in deciding the future of this currency pair. Look for major developments in the coming weeks as these pieces come together.
Market Sentiment and Future Outlook
Overall, market sentiment towards USD/CHF has been quite jittery, with a series of risk-on and risk-off price action determining the recent bullish and bearish bias. That initial breakout in USD/CHF was soon met with a reversal. What this underscores is the intricate balancing act that traders need to walk with shifting economic indicators and central bank posturing.
As we move ahead, market participants will be looking to judge not just technical signals but broader macroeconomic developments. Only on USD/CHF it can be said that if the price manages to hold a break above 0.8170, further increases may be possible. Slipping below key support could make traders reconsider their long positions.