USD/CHF forms inverted head and shoulders after weak Swiss retail sales

Written by: Crispus Nyaga
March 1, 2021
  • The USD/CHF has risen sharply after the weak Swiss retail sales data.
  • Switzerland published strong manufacturing PMI data.
  • The falling US Treasury yields contributed to the current price action.

The USD/CHF price is rising for the second consecutive day even after the relatively strong Swiss manufacturing PMI data. The pair rose to an intraday high of 0.9140, which is 4.42% above the year-to-date low of 0.8760. 

USD/CHF
USD/CHF price action

Strong Swiss PMI data

In a report earlier today, the Procurement Institute published relatively strong manufacturing PMI data. The numbers revealed that country’s manufacturing PMI rose to 61.3 in February after rising to 59.4 in January. This increase was better than the median estimate of 60.0 and was the highest it has been since September 2018. 

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The agency attributed the strong performance of the sector to higher demand from local and international buyers. Also, the lengthier delivery times and rising optimism among manufacturers has also helped boost the sector.  Still, while manufacturing is an important sector, it is a small part of the Swiss economy.

Meanwhile, the USD/CHF also rose after the country released relatively weak retail sales numbers. The data revealed that the overall retail sales dropped by 0.5% in January after rising by 5.4% in the previous month. This performance was mostly because of the lockdowns that happened in January as the number of coronavirus cases continued to rise.

The USD/CHF rose as investors in forex digested the performance of the US Treasury yields. After days of rallying, the benchmark US yield declined to 1.49%, which is relatively lower than last week’s high of 1.60%. 

This performance happened a few days after the US Congress passed the $1.9 trillion stimulus package. It will now go to the Senate, where Democrats expect it to be passed in the next few weeks. In response, the US dollar index rose by more than 0.30%. The currency rose by 0.50% against the euro, 0.25% against the Japanese yen, and by 0.10% against the Swedish krona.

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USD/CHF technical outlook

USD/CHF
USD/CHF technical chart

The daily chart shows that the USD/CHF price has been in a strong uptrend. It has managed to move above the 25-day and 15-day weighted moving averages (WMA) and the 23.6% Fibonacci retracement level. The pair also seems to be forming an inverted head and shoulders pattern whose neckline is at 0.9043. Therefore, in my view, the pair will continue rising as bulls target the next resistance level at 0.9200.