The USDCHF currency pair has been a standout performer, boasting an impressive 8% surge year-to-date, with three consecutive weeks of gains.
This upward trajectory finds its roots in the monetary policy actions of the Swiss National Bank, which notably slashed rates by 25 basis points to 1.5%, making it the first major economy to do so. Recent inflation data from Switzerland further validated this move, revealing a cooling inflation rate of 1% in March.
This dovish stance by the Swiss National Bank has propelled the USDCHF pair higher, as investors flock to the Greenback for its potentially higher yields compared to the Swiss Franc. Additionally, Federal Reserve Chair Powell’s cautious stance on further rate cuts, contingent on seeing a further cooling of inflation, suggests a prolonged period of elevated U.S. rates. All eyes are now on the upcoming U.S. Nonfarm Payrolls data, which is expected to provide crucial insights into the labour market’s trajectory and potentially influence expectations for future rate adjustments.
Technical
The USDCHF pair has been riding a notable uptrend, supported by its position above the 100-day moving average and within an ascending channel pattern.
Recent price action saw a significant buildup of upside momentum during a consolidation phase, leading to a breakout and subsequent rally to the 0.90955 level. However, the rally encountered resistance as overbought RSI conditions emerged, temporarily stalling upward momentum. A retracement towards the 61.80% Fibonacci Retracement Golden Ratio ensued, but the pair swiftly reversed course from this level, reaffirming the bullish trajectory.
Should the current upside momentum persist, traders could anticipate a retest of the 0.90955 resistance level. Conversely, a resurgence of downside pressure could see interest gravitating towards the 50% Fibonacci level as a potential support point in the short term.
Summary
The USDCHF pair has surged 8% year-to-date, bolstered by the Swiss National Bank’s rate cuts and favourable inflation data. Technically, it maintains an uptrend above the 100-day moving average, eyeing a potential retest of resistance at 0.90955.
Sources: Swiss National Bank, Swiss Federal Statistical Office, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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