USD/CHF struggles to find direction after weak Swiss GDP data
- The USD/CHF pair was little changed after the latest Swiss GDP data.
- The Swiss economy contracted by 0.5% in the first quarter.
- The retail and manufacturing sectors rebounded in April and May, respectively.
The USD/CHF pair was little changed on Tuesday after the relatively disappointing Swiss GDP data. The pair is trading at 0.8987, which is in the same range it has been in the past few days.
Swiss GDP data
The Switzerland economy declined in the first quarter as the rising coronavirus cases in Europe hampered demand for the country’s goods. According to the State Secretariat for Economic Affairs (SECO), the economy declined by 0.5% in the first quarter after rising by 0.1% in Q4. The economy contracted by 0.5% on a year-on-year basis, a better performance than the 1.6% decline in the fourth quarter.
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According to SECO, the contraction was also because of the slaggish performance in the services sector as many non-essential businesses closed. The accomodation and food services sector declined by 30.4% while arts and entertainment declined by 5.1%. The only sectors that recorded growth were in finance and public administration. Additionally, the country’s exporters boosted sales to the United States and China.
Analysts and the Swiss National Bank (SNB) believe that the country’s economy will record a strong recovery in the second and third quarters. For one, more people are being vaccinated in Switzerland and the European Union. This means local and regional trade will soon bounce back.
The USD/CHF also reacted to the strong Swiss retail sales and PMI numbers. According to SECO, the country’s retail sales rose by 35.7% year-on-year in April as the reopening continued. This performance was from a low base since the country was in lockdown in April last year.
Additional data by Procure said that its manufacturing PMI increased from 69.5 in April to 69.9 in May. This was a better performance than the 64.4 recorded in Germany and the 62.3 recorded in Italy.
USD/CHF technical forecast
The daily chart shows that the USD/CHF pair rose to a high of 0.9472 in April. This was a notable level since it was slightly above the 61.8% Fibonacci retracement level. Since then, the price has dropped by more than 5.25% to the current 0.8986. The USD/CHF pair has moved below the 25-day moving average and is slightly below the 23.6% retracement.
This is further evidence that bears are in control. The two lines of the Stochastic oscillator have also moved above the neutral level. Therefore, the pair may have a short relief rally, where it will retest the 38.2% retracement and then resume the downward trend.