The Swiss Franc (CHF) has gained ground against the US Dollar (USD) after hotter-than-expected inflation data in Switzerland tempered expectations of an imminent rate cut by the Swiss National Bank (SNB). This, coupled with a softer dollar on the back of a dovish Federal Reserve and weak US jobs data, has put the USDCHF pair on shaky ground.
Market sentiment towards the dollar remains cautious, with expectations for a potential easing cycle by the Fed as early as June. Another downbeat UoM consumer sentiment reading on Friday could further weaken the dollar if it reflects a decline in confidence. Conversely, a strong data print could see the dollar regain some lost ground.
Technical Analysis
The technical picture on the 4-hour chart suggests a potential continuation of the recent CHF recovery but with some caution. The price action is currently flat at 0.90674, trading above the 20-SMA (green line) but below the 50-SMA (blue line) and 100-SMA (orange line). The recent break of the 20-SMA below the 50-SMA and 100-SMA (bearish crossover) is countered by the flattening of the price action, which could indicate a potential reversal.
The RSI (42.89) hovering near the midline suggests neutrality. However, a sustained push above the SMAs could see a test of the initial resistance at 0.91417, potentially confirming bullish momentum and targeting the 0.92241 resistance. Conversely, failing to break above the SMAs could lead to a decline towards the 0.90195 support. A break below this level would expose the 0.89451 and 0.88822 support zones.
Summary
The USDCHF faces conflicting fundamental forces, with the Fed’s dovish stance potentially weakening the USD and the SNB’s hawkish tilt supporting the CHF. Market sentiment and US data releases this week will be key drivers. Technically, a break above the SMAs on the 4-hour chart could signal a bullish continuation, while a break below support at 0.90195 could indicate further weakness in the USD.
Sources: TradingView, Trading Economics, State Secretariat for Economic Affairs.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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