USD/CHF forecast as the Swiss franc sell-off accelerates

  • The USD/CHF pair has been in a strong bullish trend.
  • The pair is trading at the highest point since 2019.
  • The divergence between the Fed and SNB has contributed.

The Swiss franc relentless crash continued on Monday. The USD/CHF pair has risen in the past seven straight weeks and is trading at the highest point since May 2019. Similarly, the EUR/CHF pair has risen in the past three straight weeks.

Fed and SNB divergence

The USD/CHF pair has rallied sharply as the divergence between the Federal Reserve and the Swiss National Bank (SNB) rose. 

The Fed has maintained a hawkish tone in its bid to slow the country’s consumer inflation. Data published last week revealed that the country’s inflation is still hovering at the highest level in almost 40 years. The same is true with the core CPI, which is at 6%.

At the same time, data published in the previous month revealed that the labor market is doing well. The economy added over 400k jobs in April while the unemployment rate dropped to 3.5%.

As a result, Fed officials who spoke last week insisted that the bank will continue hiking interest rates in the coming months. Expectations are that the bank will hike interest rates by 0.50% in June and July and then shift to 0.25% hikes.

On the other hand, the SNB has signaled that it will continue maintaining its interest rates unchanged. Besides, the country’s inflation has held better than in other countries. According to Fitch, the CPI rose to 2.5% as oil and gas prices rose. Fitch expects that inflation will decline to 1.7% by end of the year.

Switzerland has also maintained an extremely low unemployment rate. According to the statistics agency the country has an unemployment rate of about 2%.

USD/CHF forecast

The daily chart shows that the USD/CHF pair has been in a strong bullish trend in the past few months. The pair has moved slightly above the parity of 1.00. The jump continued after the price moved above the important resistance at 0.9460, which was the highest level on March 16th. 

The pair moved above all moving averages while the Stochastic Oscillator has moved to the overbought level. The price has moved above the dots of the Parabolic SAR indicator.

Therefore, the pair will likely keep rising as investors target the important resistance level at 1.0200. A drop below the support at 0.9900 will invalidate the bullish view.

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Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son, and nephew and enjoys watching the PGA Tour and Formula 1.