USD/CHF Facing an Important Test at the 50 Daily SMA
Skerdian Meta • 2 min read
USD/CHF has been bearish since November, reversing at around 1.0150s and falling to 0.8550s by July, although it has been retracing higher since then and the price moved above 0.88, where it is finding resistance on the daily chart. This zone has been support for this forex pair in July, which now seems to have turned into resistance.
Besides that, the 50 SMA (yellow) is also acting as resistance on the daily chart, so USD/CHF has been trading around this round level for several days. The 20 SMA (gray) also seems to have turned into support on this timeframe, so the pressure remains bullish overall.
Yesterday the USD/CHF pair retreated around 50 pips lower off the resistance, as the USD was pulling back. But we saw a quick reversal and buyers came back in, gaining momentum and positioning itself for a potential rally beyond the resistance area of 0.88. The Swiss Franc is anticipated to challenge the significant round-level resistance at 0.8800. This upward movement in the pair is being fueled by the strength observed in the US Dollar Index (DXY), which has been boosted by a modest recovery in inflation and Producer Price Index (PPI) data for July, surpassing expectations, while US retail sales also posted some strong numbers.
On the Swiss Franc’s front, investors are growing increasingly concerned about the upcoming interest rate decision by the Swiss National Bank (SNB), scheduled for announcement in September. According to a Bloomberg survey, it is suggested that the SNB might raise interest rates by 25 basis points (bps) in September, bringing them to 2%. In terms of inflation outlook, the survey indicates a projected Consumer Price Index (CPI) of 1.5% for the year 2024.
On the other hand, the Federal Reserve (Fed) is widely anticipated to maintain its current interest rate stance in the upcoming September meeting. Despite that, it is expected that interest rates will be kept at elevated levels for an extended period to ensure a gradual return of inflation to the targeted 2%. This approach is aimed at alleviating concerns of an imminent recession. So, chances are for a break above the resistance zone and the 50 SMA on the daily chart.