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It rises and tests the 50-DMA above 0.8500

  • USD/CHF is consolidating between 0.8400-0.8550 with bullish momentum suggesting the potential for higher prices.
  • Buyers need to release the 50-DMA at 0.8537 and the September 12 peak of 0.8550 to target 0.8600 and 0.8748.
  • A break below 0.8500 could see a pullback towards 0.8400, where buyers could look for a retracement to the 50-DMA levels.

USD/CHF posted solid gains of over 0.30% on Thursday as the greenback recovers, aiming to end the week with solid gains. As the Asian session begins on Friday, the pair is trading at 0.8522, essentially unchanged.

USD/CHF Price Forecast: Technical Insights

USD/CHF is neutral to bullish after consolidating in the 0.8400-0.8550 area during September and the first four days of October.

Momentum favors buyers as the Relative Strength Index (RSI) has turned bullish, suggesting higher prices are ahead.

However, USD/CHF buyers need to release the 50-day moving average (DMA) at 0.8537. If it is broken, the ceiling level soon to be broken will be the September 12 peak at 0.8550. A breach of the latter will expose the 0.8600 figure, followed by the next cycle high seen at 0.8748. the maximum of August 15.

On the other hand, if sellers drag prices below 0.8500, the pair could target 0.8400 in search of a rally, which could push prices to the 50-DMA.

USD/CHF Price Action – Daily Chart

Swiss Francs FAQ

The Swiss Franc (CHF) is the official currency of Switzerland. It is among the top ten most traded currencies globally, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by broad market sentiment, the country’s economic health, or actions taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss franc was pegged to the euro (EUR). The color was suddenly removed, leading to a more than 20% increase in the value of the franc, causing turmoil in the markets. Even though the peg is no longer in effect, CHF holdings tend to be highly correlated with those in the euro due to the heavy dependence of the Swiss economy on the neighboring eurozone.

The Swiss Franc (CHF) is considered a safe-haven asset or a currency that investors tend to buy during times of market stress. This is due to Switzerland’s perceived status in the world: a stable economy, a strong export sector, large central bank reserves or a long-standing policy stance of neutrality in global conflicts make the country’s currency a good choice for fleeing investors of risks. Turbulent times are likely to strengthen the value of the CHF against other currencies that are considered riskier to invest in.

The Swiss National Bank (SNB) meets four times a year – once a quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or is expected to be above target in the near future, the bank will try to tame rising prices by raising the policy rate. Higher interest rates are generally positive for the Swiss franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. Conversely, lower interest rates tend to weaken the CHF.

Macroeconomic data released in Switzerland is key to assessing the state of the economy and can have an impact on the valuation of the Swiss franc (CHF). The Swiss economy is generally stable, but any sudden changes in economic growth, inflation, the current account or the central bank’s foreign reserves have the potential to trigger movements in the CHF. Overall, high economic growth, low unemployment and high confidence are good for the CHF. Conversely, if economic data indicates a weakening of momentum, the CHF is likely to depreciate.

As a small and open economy, Switzerland is heavily dependent on the health of its neighboring eurozone economies. The wider European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the euro area is essential for Switzerland and thus for the Swiss franc (CHF). With such dependence, some models suggest that the correlation between euro (EUR) and CHF assets is greater than 90%, or almost perfect.

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