USD/CHF forecast: Rising wedge forms ahead of US NFP data

The USD/CHF exchange rate continued its uptrend this week as demand for the US dollar remained. Still, the pair has formed a highly bearish chart pattern, pointing to more downside in the near term. 

US dollar is beating Swiss franc as the war continues

The USD/CHF exchange rate is doing well as investors move to the greenback as the US-Iran war has continued. 

One reason for this is that analysts believe that the Federal Reserve will maintain a more hawkish tone this year as inflation jumps.

The most recent data showed that the headline Consumer Price Index (CPI) rose 2.4% in February this year.

Analysts believe that inflation will continue growing this year, with OECD predicting that it will jump to 4.2% later this year. WTI crude oil price has already flipped Brent, while the average gasoline price has soared to $4. Home heating prices have continued rising this year.

Therefore, analysts expect that the Federal Reserve will either leave interest rates unchanged between 3.50% and 3.75% or hike later this year. 

The main challenge for this is the labor market has stagnated, with the economy shedding over 92k jobs in February. Analysts expect the upcoming report to show that the economy created 60k jobs in March as Kaiser Permanente workers returned from a strike.

The USD/CHF pair reacted mildly to the latest Switzerland consumer inflation report. Data released on Thursday showed that the headline Consumer Price Index rose in March as energy prices rose. It rose from 0.1% in February to 0.3% in March. The month-on-month figure rose to 0.2%.

USD/CHF technical analysis 

USDCHF chart | Source: TradingView 

The daily timeframe chart shows that the USD/CHF pair has been in an uptrend in the past few weeks. It jumped from a low of 0.7600 in January to the current 0.8000.

The pair has jumped above the important resistance level at 0.7833, its lowest level in September last year.

It has jumped above the 50-day and 25-day Exponential Moving Averages (EMA). The two lines formed a bullish crossover pattern on March 25.

The Relative Strength Index (RSI) has moved from the oversold level of 23.70 in January to the current 61. Also, the Percentage Price Oscillator (PPO) has continued rising and has already crossed the zero line.

However, the pair has formed a rising wedge pattern, which is made up of two ascending and converging trendlines. 

Therefore, there is a likelihood that the pair will retreat in the coming weeks, potentially to the key support level at 0.7833. A drop below that level will point to more downside, potentially to the year-to-date low of 0.7600.