Created
: 2025.05.27
2025.05.27 14:55
The USD/CHF pair recovers some lost ground to near 0.8220 during the early European session on Tuesday. However, the potential upside for the pair might be limited amid the concerns over the mounting US national deficit. Traders await the US Conference Board's Consumer Confidence report, which is due later on Tuesday. Also, Durable Goods Orders and the Dallas Fed Manufacturing Index will be published.
According to the daily chart, the bearish outlook of USD/CHF remains in play as the pair remains capped below the key 100-day Exponential Moving Average (EMA). The path of least resistance is to the downside, with the 14-day Relative Strength Index standing below the midline near 41.55.
The first downside target for the cross emerges at 0.8150, the lower limit of the Bollinger Band. Extended losses could see a drop to 0.8067, the low of April 22. The next contention level for USD/CHF is seen at the 0.8000 psychological level.
On the bright side, the immediate resistance level is located in the 0.8300-0.8305 zone, representing the round figure and high of May 22. Sustained trading above this level could attract some buyers to 0.8445, the upper boundary of the Bollinger Band. Further north, the next hurdle to watch is 0.8575, the 100-day EMA.
The Swiss Franc (CHF) is Switzerland's official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country's economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc's value, causing a turmoil in markets. Even though the peg isn't in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency 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 in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country's currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year - once every 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 forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its 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. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc's (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank's currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland's main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
USD/CHF daily chart
Created
: 2025.05.27
Last updated
: 2025.05.27
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