Indeed, the USD/CHF currency pair has pulled back sharply in recent weeks. As the US Dollar succumbs to extreme bearish pressure from April CPI readings, EURUSD has pulled back toward the 0.8400 key figure. As a result, the US Dollar Index (DXY) fell to ~101.30. This is a drop from its monthly peak of about 102.00, emphasizing the impact from recently released and slower-than-forecast inflation data. By contrast, the Swiss Franc has performed remarkably well against all major and minor currencies, enriching its long-time status as stalwart of the FX.
As the most recent CPI report indicated, overall inflation is up just 2.3% annually. That rate was under market expectations and a tick lower than the July rate of 2.4%. The core CPI, which excludes the often-volatile food and energy prices, increased 2.8%. Nonetheless, this increase did not manage to support the US Dollar in any significant way. Consequently, the markets are pricing very little chance of a Fed hike in June.
Technical Analysis of USD/CHF
The USD/CHF pair in the last few days has clearly pushed above the 20-day Exponential Moving Average (EMA). It is now trading above the 0.8326 zone indicating a very strong bullish trend. This movement suggests that the duo has just begun a new bullish run. It may only take modest bullish momentum before the trend becomes self-reinforcing. With the asset retracing near the important round-level support of 0.8400, traders will want to closely watch this level during North American trading hours on Tuesday. This Congressional FIRE level might be make or break for their choices.
The duo revels in quite substantial protection around the horizontal floor created via the September 6 low of 0.8375. This point was once a powerful resistance level. The recent move above this threshold bolsters the bullish case for USD/CHF. If it holds above these support levels, it could build even further strength.
The 14-day Relative Strength Index (RSI) has risen up toward 60.00. Should it manage to break past this level, we may be in store for another round of bullish exuberance. Alternatively, a continued advance in the RSI above 60.00 would suggest that the bullish trend in USD/CHF is strengthening. This momentum is sure to inspire further buying from optimistic traders.
Market Dynamics and Future Projections
Market participants have a heavy bearish interest in USD/CHF and are looking for major resistance lines to become relevant. If the pair clears the symbolic resistance barrier of 0.8500, it might pave the way for an increase. Such a development would pave the way for retests of the tops at 0.8580 from April 10 and 0.8611 from April 8. This breakout would be an early signal that bullish sentiment is returning to investors, in a big way. This would increase market confidence in the Franc’s appreciation against the US Dollar.
Analysts warn that should the USD/CHF drop below the May 7 low of 0.8186 it might trigger deeper corrections. Further downside from this move would test important levels near the April 11 low of 0.8100 and then the April 21 low at 0.8040. Conversely, a downward shift would suggest a strengthening trend for the Swiss Franc. Traders and investors must keep a watchful eye on the unfolding developments.
The Swiss Franc has been the most resilient G10 currency of the session so far, outperforming the loonie the most on Tuesday. This trend is indicative of larger market forces in which currencies new economic data as well as geopolitical tensions impact investor risk appetites.