Strong US Dollar Pulls USDCHF Higher

Andreas Thalassinos
Andreas Thalassinos

29.3.2024

The Swiss franc has been in an uptrend since February 7, following a path of successively higher peaks and troughs. This was propelled by the rallying US dollar, as well as the recent monetary easing implemented by the Swiss National Bank. Traders are expected to closely monitor the currency pair in light of the forthcoming release of significant economic data that could potentially impact currency valuations.

Overview

The Swiss franc has been in an uptrend since February 7, following a path of successively higher peaks and troughs. This was propelled by the rallying US dollar, as well as the recent monetary easing implemented by the Swiss National Bank. Traders are expected to closely monitor the currency pair in light of the forthcoming release of significant economic data that could potentially impact currency valuations.

Upcoming Economic Events

Monday 02:0 pm (GMT): ISM Manufacturing PMI (USD)

Tuesday 12:30 am (GMT): Monetary Policy Meeting Minutes (AUD)

Tuesday All Day: German Prelim CPI m/m (EUR)

Tuesday 02:00 pm (GMT): JOLTS Job Openings (USD)

Wednesday 12:15 pm (GMT): ADP Non-Farm Employment Change (USD)

Wednesday 02:00 pm (GMT): ISM Services PMI (USD)

Thursday 06:30 am (GMT): CPI m/m (CHF)

Thursday 12:30 pm (GMT): Unemployment Claims (USD)

Friday 12:30 pm (GMT): Employment Change (CAD)

Friday 12:30 pm (GMT): Unemployment Rate (CAD)

Friday 12:30 pm (GMT): Average Hourly Earnings m/m(USD)

Friday 12:30 pm (GMT): Non-Farm Employment Change (USD)

Friday 12:30 pm (GMT): Unemployment Rate (USD)

Technical Analysis

The USDCHF has been trending upward since February 7, when the price formed a reversal to the upside, popularly known in technical analysis as the failure swing. Specifically, the trough of 0.85509 failed to fall lower than the previous trough of 0.83322, alerting for the bears' weakness to maintain control of the previously established downtrend. Consequently, prices exceeded the peak at 0.87282, thus ending the previous established direction and signaling the beginning of a new trend to the upside. Both the Moving Average and the Momentum oscillator agree with the bullish scenario. More specifically, the USDCHF prices surge above the Moving Average line, and the Momentum oscillator remains above its baseline.

Upside Potential Targets

 If the bulls continue to control the market, the following price targets may be of interest:

0.91121: The first price target stands at the peak of 0.91121, marked on November 1.

0.92447:  The second objective is the peak of 0.92447 recorded on October 3, which may serve as a potential target.

0.93019: The third price objective is estimated at 0.93019, corresponding to the 423.6% Fibonacci extension drawn from the swing high at 0.87282 to the swing low of 0.85509.

0.94205: Finally, the fourth potential target is calculated at 0.94205, which represents the 423.6% Fibonacci extension drawn from the peak at 0.88927 down to the though 0.87296.

Downside Potential Targets

Traders may consider the following potential downside targets if the bears take over the market.

0.89366: The first target is estimated using the weekly Fibonacci Pivot Points.

0.88927: The second potential target is the resistance of 0.88927 formed on March 1, which turned to support.

0.88591: The third target is calculated by applying the Fibonacci Pivot Points on the weekly timeframe.

Fundamentals

The Swiss National Bank announced it will lower the SNB policy rate by 0.25 to 1.5% on March 21. This move has been made possible due to the effective fight against inflation in the past two and a half years. Inflation has been below 2% for several months, the range the SNB considers price stability.

Moderate global economic growth is expected in the upcoming quarters. The restrictive monetary policy will likely cause inflation to decrease further. However, significant risks for the global economy are still associated with this scenario. In certain countries, inflation may remain high for extended periods, requiring a tighter monetary policy than initially anticipated in the baseline scenario.

Geopolitical tensions have the potential to rise, which could lead to a scenario where global economic activity is weaker than anticipated. Strong global economic activity may not hold true due to these factors. 

In the final quarter of 2023, the growth of Swiss GDP was moderate. The services industry continued to grow; however, substantial growth was needed in the manufacturing sector. Unemployment increased while overall production capacity utilization remained at normal levels.

Growth is expected to remain modest in the upcoming quarters due to weak demand from abroad and the appreciation of the Swiss franc in real terms over the past year. Switzerland's GDP is anticipated to grow by approximately 1% this year. As a result, unemployment is expected to continue its gradual rise, and production capacity utilization is likely to decrease slightly further. 

Conclusion and Considerations

In conclusion, the positive momentum propelled by the recent monetary easing of the Swiss National Bank and the strengthening of the US dollar caused the USDCHF exchange rate to rally for three consecutive weeks. Keeping up-to-date with economic events and geopolitical changes will be crucial in making informed trading choices in the financial markets.

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.