USD/CHF finds resistance as Swiss consumer confidence improves

USD/CHF finds resistance as Swiss consumer confidence improves
Written by:
Crispus Nyaga
4th August, 06:31
  • The USD/CHF pair found resistance after SECO released better consumer confidence data from Switzerland.
  • The data showed that consumer confidence rose to -12 from the historic low of -39.
  • The number came a day after the statistics office released better inflation data from the country.

The USD/CHF pair is little changed today as traders reflect on the positive consumer confidence data from Switzerland and the recovering inflation. The pair is trading at 0.9180, which is significantly higher than Friday’s low of 0.9057.

USD/CHF
USD/CHF recovery pauses

Swiss consumer confidence rise

The USD/CHF pair has been in a strong downward trend in the past few weeks. Since May, the pair has dropped from a high of 0.9800 to a low of 0.9057. That made the Swiss franc among the strongest currencies in the developed world. At the current level, the USD/CHF pair is at the lowest level since February 2018.

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Consumer confidence in Switzerland has made a modest recovery, according to data by the State Secretariat for Economic Affairs (SECO). The consumer sentiment index improved to -12, which is a significant recovery from the historic low of -39 that was recorded in April. The historic average is -5.

The improving sentiment is primarily due to the fact that the country has handled the coronavirus pandemic well. In total, the country recorded more than 35,000 cases and less than 2,000 deaths, which are better numbers than most European countries.

The general expectations for the economic development have risen to -17. At the same time, more people in Switzerland are increasingly worried about the labour market. The employment index is close to the historic low. Also, the likelihood of making a major purchase is slightly above the April’s low.

The USD/CHF is also reacting to the inflation numbers that were released yesterday. Data from the statistics office showed that the headline consumer price index fell by 0.2% in July compared with the previous month. The index was -0.9%, compared to the same month in 2019. The core CPI, on the other hand, dropped to -0.4%.

Other recent numbers from Switzerland have been relatively positive. Retail sales have increased and manufacturing, unemployment rate has fallen, and services PMIs have been stable. Still, SECO expects that the economy will contract by more than 6% this year.

USD/CHF technical analysis

USD/CHF
USD/CHF technical forecast

The USD/CHF pair is trading at 0.9180. On the daily chart, this price is below the 50-day and 100-day exponential moving averages. It is also along an important resistance level, which was the lowest level on March 9. Also, the RSI has emerged from the oversold level of 25 to the current level of 33 Therefore, I suspect that the pair will try to continue rising as bulls attempt to move above 0.9200. At the same time, it is possible that the previous downward trend will accelerate.

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