USD/CHF slides to 2015 lows as SECO boosts Swiss economic forecast
- The USD/CHF dropped to the lowest level since February 2015.
- The pair was reacting to the latest forecast by SECO.
- The agency expects the economy to contract by 3.0% in 2020.
The USD/CHF price is hovering near its lowest level since February 2015 as traders react to the robust economic forecast from Switzerland. This decline is also because of the overall weaker US dollar. It is trading at 0.8857, which is 10 percent lower than this year’s high of 0.9900.
SECO boosts Swiss forecast
In a report released earlier today, the State Secretariat for Economic Affairs (SECO) said that the economy will likely drop by 3.3%, an improvement from the previous estimate of 3.8% decline. This will be the worst contraction since 1975.
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SECO cited the second wave of the virus as the main reason for the general contraction of the economy. However, the fact that Switzerland has not implemented any major lockdowns will help make the contraction less severe.
The country will then bounce back by 3.0% in 2021, lower than the previous estimate of 3.8%. The downward revision is because of the impact of the ongoing wave of the virus. It also expects the economy to grow by 3.1% in 2022.
Further, the Swiss unemployment rate will likely rise to 3.2% while the rate of inflation will remain below the SNB target of 2.0%.
The USD/CHF price is also reacting to the latest producer price index (PPI) data. According to the country’s statistics bureau, the headline producer price index (PPI) declined by 0.1% in November from 0.0% in the previous month. This led to an annualised decline of 2.7%. The bureau attributed this decline to the overall weakness of petroleum and pharmaceutical products.
Traders are also eying the upcoming interest rate decision by the Federal Reserve. In its final decision of the year, economists believe that the bank will leave rates and quantitative easingpolicies unchanged.
USD/CHF technical outlook
The USD/CHF price has been in a steep decline, as shown in the daily chart above. This trend is supported by the 50-day and 100-day exponential moving averages. It is also below the important support of 0.900, where it had struggled to move below in August and November.
Also, the two lines of the stochastic oscillator are below the oversold level, meaning that a reversal is possible in the longer term. Therefore, while the pair will likely continue moving lower, there is a likelihood that it will go through a reversal since it is getting oversold. So, be careful and consider practicing using a forex demo account first.