The USD/CHF pair has recently encountered a key support level, marking a pause in its downward corrective phase. As of the analysis time, the exchange rate is hovering between pivotal support at 0.86899 and resistance at 0.87410 points.
Market context
The early February descent of the Swiss Franc against the dollar sent the USD/CHF to a two-month high indicates a period of significant weakness in the Franc, influenced by a strong dollar buoyed by Federal Reserve hawkishness and positive economic data from the US. The Swiss Franc’s pressure is compounded by internal factors, as the Swiss National Bank’s anticipation of rising inflation—spurred by VAT increases and the scaling back of electricity subsidies—signals potential economic vulnerabilities. Despite this, persistent inflation rates below the 2% target have justified the continuation of the Swiss National Bank’s accommodative policies, potentially setting the stage for further depreciation of the Franc against the US dollar if the fundamental picture does not change in foreseeable future.
Technical analysis
As indicated by the 4-hour chart, the USD/CHF pair has embarked on an upward trajectory since the new year. Although buyers failed to close above the January 23rd high in Tuesday’s trading, they managed to reach 0.87410, maintaining a bullish tone by penetrating the last major top.
Currently, USD/CHF is considered trading sideways, bounded by support at 0.86899 and resistance at 0.87155. Wednesday’s early trading saw the price touching the support at 0.86899 with insufficient seller participation, potentially granting buyers an opportunity to retest the short-term resistance at 0.87155. A completion of the bearish correction would require sellers to overpower the support at 0.86899, potentially paving the way for a decline to 0.86760 and 0.86981 before the significant support zone at 0.86389 comes into view. Both the RSI and MACD, despite being in bullish territory, indicate a buyer’s pullback.
Alternative scenarios
On the flip side, should the resistance at 0.87155 be decisively broken, USD/CHF may aim to reconquer the previous top at 0.87410. The continuation of the bullish trend hinges on surpassing this price barrier.
Influential events
Key events that could induce volatility in the USD index include the US trade balance figures and the auction of 10-year Treasury notes during the North American trading session.
