USD/CHF struggles after the weak Swiss producer inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Apr 16, 2021
  • The USD/CHF is in a tight range after the latest Swiss producer inflation data.
  • The data showed that the PPI increased by 0.6% MoM and dropped by 0.2% YoY in March.
  • The pair has struggled also because of the weaker US dollar.

The USD/CHF price has dropped for the past two consecutive weeks as the market reflects on the recent strong US data. It is also reacting to the latest Switzerland producer price index (PPI) numbers. It has dropped to 0.9225, which is  below the weekly high of 0.9245. 

USD/CHF price action

Switzerland PPI

The Swiss economy has done modestly better than that of its peer countries. Its unemployment rate remains below 3% and retail sales have been relatively better. This performance is mostly because the country’s key sectors like finance and manufacturing have done well. Also, the government has put in place measures to support the economy.

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However, the country is still seeing low inflation, putting the Swiss National Bank (SNB) under pressure. Data published today revealed that the producer price index, also known as factory-gate prices,  rose by 0.6% in March after rising by 0.3% in the previous month. This performance led to an annualised decline of 0.2%. Two weeks ago, data showed that the Swiss CPI rose to 0.3% in March. It fell by 0.2% on a year-on-year basis.

Therefore, there are limited chances that the Swiss National Bank (SNB) will hike interest rates in the near term. In its most recent decision, the SNB committed to leaving rates lower in a bid to support the economy and indirectly devalue the franc.

The USD/CHF price has also declined because of the weaker dollar. The dollar index has declined this week since traders and analysts at most forex brokers are not convinced that the US recovery will remain. This is after retail sales and consumer inflation numbers surged to the highest level in years. Manufacturing activity also rose while the number of people filing for jobless claims dropped.

USD/CHF technical forecast

Swiss franc technical chart

The four-hour chart shows that the USD/CHF pair has been in a strong downward trend lately. It has fallen by more than 2% from its highest point this year. Along the way, it has moved below the 25-day and 15-day exponential moving averages while the moving average convergence divergence (MACD) has formed a bullish divergence pattern. Therefore, while the pair may keep falling, there is a possibility that it will bounce back in the near term. If this happens, bulls will likely retest the resistance at 0.9300.

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