USD/CHF Daily Forecast – Strength In The U.S. Dollar Continues

The U.S. Dollar experienced material strength yesterday as investors rushed into safe haven assets, and the U.S. Dollar Index breached the 100 level. However, the Swiss frank is also considered as safe haven, so USD/CHF had a more modest move compared to many other pairs.

Currently, USD/CHF settled above the support at the 50 EMA at 0.9650 but things may change quickly. Today, the Swiss National Bank will announce its rate decision. The current rates stands at -0.75%, and the analyst consensus is that the rate will remain unchanged.

Indeed, the Swiss National Bank does not have the room to cut rate further since it is already at a seriously negative level. However, the Swiss National Bank may announce additional support measures, just like the European Central Bank did yesterday.

Last night, the ECB had an emergency meeting and announced a new bond purchase program worth 750 billion euros in order to stop the panic on the financial markets.

It remains to be seen whether such efforts will be successful since the reason of the panic is the real damange done by coronavirus containment measures rather than some original problems in the financial markets.

For the U.S. dollar, the key question is whether investors will continue to view it as the main safe haven asset since the U.S. begins to implement serious virus containment measures that will lead to a material hit on the economy.

Forecasts about the size of such a hit are revised to the downside almost every day. For example, Deutche Bank analysts have recently stated that U.S. GDP may drop as much as 13% on an annualized basis in the second quarter.

Technical Analysis

Yesterday, I wrote that further upside in USD/CHF will require the U.S. Dollar Index to stay above 100. This happened, and the U.S. Dollar Index is currently above 101.

The upside channel in USD/CHF remains intact, and now the key catalyst for further upside in the pair is the ability to stay above the 50 EMA at 0.9650. If this level is breached to the downside, 20 EMA will serve as the next support level at 0.9560. The continuation of the current upside trend will lead the pair to the next resistance level at 0.9750.