The USD/CHF currency pair on Wednesday declined for the third day in a row. It plunged to a new three-month low of 0.7860 in the course of the European trading day. Despite unexpectedly strong Q3 Gross Domestic Product (GDP) data from the United States, the US Dollar (USD) has continued to underperform against its major peers. While the price continues to stay below important technical indicators, analysts are pointing out that bearish momentum is very likely to continue.
Even many professional economists were flabbergasted at the state of the US economy. Over the same time period, the GDP grew at an equally impressive annualized pace of 4.3%. This figure came as a surprise, as the consensus had predicted the growth rate to be 3.3%, a decrease from 3.8% in the last quarter. In addition to the positive economic news, the USD should by all rights be soaring higher right now. This has fueled speculation about underlying fault-lines in the American economy.
Declining Technical Indicators
The USD/CHF pair has also fallen under the 20-day Exponential Moving Average (EMA) at 0.7966. This rapid decline reflects the overwhelmingly negative outlook that has taken hold in the market. The EMA currently pointing lower is capping any rebound attempts for the pair. The 14-day Relative Strength Index (RSI) is at its lowest level of 31. This decline reflects lackluster momentum and highlights the persistent pressure to sell.
Technical analysts believe that unless the USD/CHF can close above the 20-day EMA, bearish momentum should persist. Look out for a daily close below that important level on September 17 which was at 0.7830. Should this occur, it’ll add pound downside pressure and may open the door for more losses for the USD vs CHF.
Swiss Franc Gains Ground
The Swiss Franc has continued to recent strength against its major counterparts. This is nothing short of miraculous considering the US Dollar looks to falter into Christmas Eve. Market participants are increasingly favoring safe-haven currencies like the CHF, particularly amid concerns regarding global economic stability and inflationary pressures.
The USD/CHF heat map USD/CHF shows a different view, percentage changes of all the major currencies against each other. Second, the CHF has sharply outperformed its peers as of late. Investors are very much looking at these trends. Now they’re moving their sentiment away from riskier assets to safer currencies—and it’s all because of the chaotic market conditions.
Broader Market Implications
The USD is by far the most traded currency in the world, representing more than 88% of all foreign exchange turnover. The current turmoil the USD is experiencing could have far-reaching effects on global trade and investment. The US Dollar Index (DXY) is the most widely known metric for measuring the dollar’s strength against a basket of other currencies. At present, it is plummeting near a three-month low at 97.75.
This decrease in the DXY is illustrative of the broader problems causing the dollar to continue its fall. Add in recent economic data that has reinforced a mixed, if not weakening, outlook for the US economy. How long this lasting flimsy momentum may be a factor in central bank policy and generally investor attitudes in the future remains to be seen.