USD/CHF: Swiss franc bulls prevail after better macro data

Written by: Crispus Nyaga
January 19, 2021
  • The USD/CHF pair declined today after the relatively strong Swiss PPI data.
  • The pair seems to have formed a triple-top pattern at the YTD high.
  • The weaker US dollar has also contributed to today's price action.

The USD/CHF declined by 0.30% today after the relatively better Swiss producer price index (PPI) data and the weaker US dollar. It is trading at 0.8883, which is 0.50% below the year-to-date high of 0.8925.

USD/CHF price action

Switzerland inflation still under pressure

The Swiss economy has been battered by the coronavirus pandemic. The country has confirmed more than 500,000 cases and more than 8,000 deaths. This week, the government decided to quarantine St. Moritz, a ski resort to prevent the disease from spreading. 

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Subsequently, consumer and producer prices have been under pressure, according to the Federal Statistics Office (FSO). In a report last week, the office said that consumer prices dropped by 0.7% in 2020. This was lower than the 0.4% and 0.9% increase recorded in the past two years consecutively.

In another report today, the office said that the producer price index rose by 0.5% in December after falling by 0.1% in the previous month. The annual PPI declined by 2.3%, which was slightly better than the previous month’s decrease of 2.7%. The number has been increasing since June last year when it bottomed at -4.5%. 

The USD/CHF is also falling because of the US dollar weakness. The dollar index has declined by more than 0.30% as traders look forward to the new Joe Biden administration. In a speech last week, the president-elect launched a $1.9 trillion stimulus proposal. 

And in her written statement, Janet Yellen, the incoming Treasury Secretary, said that the country should spend big to prevent further weakness. The government has also proposed spending trillions of dollars on infrastructure and clean energy.

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USD/CHF technical outlook

USD/CHF technical chart

On the four-hour chart, we see that the USD/CHF found a substantial resistance at the 0.8925 level. In fact, it formed a triple-top pattern, as shown above. It has also managed to move below the 25-day and 50-day exponential moving averages

Therefore, after the triple-top, it seems like bears have prevailed, which will likely continue falling. If this happens, the next support level to watch will be 0.8840, which is the neckline of the top pattern. Further declines below that support will see the price attempt to move below 0.8800.