USD/CHF forecast as Swiss economic rebound accelerates

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 May 5, 2021
  • The USD/CHF pair has gained in the past two days.
  • This performance is due to the overall stronger US dollar.
  • Technical analysis points to a bearish breakout in the near term.

The USD/CHF price rose for the second consecutive day as the US dollar rally accelerated. It ignored the relatively strong economic data from Switzerland. It is trading at 0.9147, which is slightly above the year-to-date low of 0.9080.

USD/CHF
USD/CHF price action

US dollar strength

The USD/CHF pair is mostly rising because of the overall dollar strength. The US dollar index (DXY) has risen for the second straight day as the market react to the hawkish statement by Janet Yellen. In a speech on Tuesday, she said that the Federal Reserve may need to start gradual tightening to prevent the economy from overheating. A hawkish Federal Reserve policy would be bullish for the USD/CHF pair.

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While the Fed has committed to maintaining low interest rates, analysts at several forex brokers believe that the bank will be forced to change its tune. Furthermore, the American economy seems to be firing on all cylinders. Manufacturers are doing well as demand increases while the labour market is tightening as the country reopens.

The USD/CHF pair is rising even after recent data showed that the Switzerland economy is rebounding. On Monday, data by Procure.ch showed that the manufacturing PMI rose from 66.5 in March to 69.5 in April. This was the highest figure on record and is evidence that the country’s manufacturers are doing well.

On Tuesday, a report by the State Secretariat for Economic Affairs (SECO said that consumer confidence was rebounding. In total, consumer sentiment rose to -7 in April, close to where it was before the pandemic started. This growth was mainly because of the significant improvement of the general economic development. This is partly because the government is intensifying its vaccination efforts.

The USD/CHF is also reacting to the improvement of the country’s consumer price index (CPI). The headline CPI rose by 0.3% year-on-year in April after falling by 0.2% in the previous month. While the CPI was below the SNB target of 2%, it was the first time it has been in the positive zone in months.

USD/CHF forecast

USD/CHF
USD/CHF technical chart

The four-hour chart shows that the USD/CHF pair has risen in the past few days. While doing this, the pair has crossed the 25-day and 50-day exponential moving averages (EMA) while the Relative Strength Index (RSI) has been rising. The pair also seems to have formed an ascending channel pattern. Therefore, there is a possibility that the pair will bounce back lower as bears target the year-to-date low of 0.9080.

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