USD/CHF prediction after the strong Swiss 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 Dec 1, 2021
  • The USD/CHF pair was little changed after the strong Swiss inflation data.
  • Consumer prices rose by 1.5% in Switzerland in November.
  • The pair will likely break out lower in the near term.

The USD/CHF price was in a tight range on Wednesday as the market reflected on the Fed Chair’s statement and the strong Switzerland inflation data. The pair is trading at 0.9211, where it has been in the past few days. It is about 1.75% below the highest level in November this year.

Switzerland inflation data

The Swiss statistics agency published relatively strong consumer price index (CPI) data. According to the agency, the headline CPI moved from 0.3% in October to 0.0% in November. This figure was better than the median estimate of a 0.1% decline. 

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On a year-on-year basis, the country’s inflation rose from 1.2% to 1.5%. Also, this was better than the median estimate of 1.3%. Still, like Japan, Switzerland is going through a period of relatively low inflation. For example, on Tuesday, data published by Eurostat revealed that the Eurozone CPI jumped to a multi-year high of more than 6%.

Analysts expect that the Swiss National Bank (SNB) will maintain a relatively dovish tone. Its hope is that this tone will help to devalue the Swiss franc since the Federal Reserve and the European Central Bank (ECB) are expected to turn hawkish in the coming months. 

The USD/CHF also reacted to the relatively weak Swiss manufacturing PMI data. According to Procure.ch, the country’s PMI declined from 65.4 to 62.5 in November. This was the lowest PMI number in about two months. Still, the data shows that the manufacturing sector is doing relatively well since it was above the expansionary zone of 50.0.

The biggest mover for the pair is the relatively hawkish statement by Jerome Powell. In a statement on Tuesday, the Fed chair said that the bank will wind down its quantitative easing policy earlier than expected.

USD/CHF forecast

The USD/CHF pair had a relatively strong November as its price rose by more than 3% between November 1 and 24th. The pair managed to undo most of the gains made during the month. It is now trading at 0.9212. 

On the four-hour chart, the pair is between the 38.2% and 50% Fibonacci retracement levels. It has also moved below the 25-day and 50-day moving averages while the MACD is still below the neutral level.

Therefore, there is a likelihood that the USDCHF pair will resume the bearish trend as bears target the key support at 0.9100.

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