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Vladimir Zernov

Yesterday, USD/CHF breached the resistance level at 0.9520 and moved to test the next resistance level at 0.9620, just like I outlined in my previous article. The pair was not able to stay above 0.9620 and entered into a correction mode.

This is not surprising since yesterday the U.S. Dollar Index reached 100, a notable resistance level. Now, the U.S. dollar is set to pullback following broad-based upside against many currencies.

On the fundamental front, the focus shifts to government policy as countries implement measures to battle against coronavirus. U.S. President Donald Trump is seeking as much as $1 billion in stimulus package to help the U.S. deal with the consequences of the disease.

According to early reports, this package can even include a payment of $1,000 to individual Americans to help them during the tough times. At this point, there are more than 6,400 coronavirus cases in the U.S., and the current pace of contagion means that the country will soon have more cases than France or Germany.

It remains to be seen whether the U.S. dollar will be able to maintain its safe haven status if the U.S. authorities will have to implement a nationwide lockdown to contain the virus. There are few safe haven alternatives though since the virus is a global problem.

Tomorrow, the Swiss National Bank will announce its rate decision. Currently, the Swiss National Bank policy rate stands at -0.75%. Since the interest rate is in the negative territory, there’s little room for further easing of the monetary policy. Thus, the markets will focus on the Bank’s comments and any additional measures that it can take during the current crisis.

Technical Analysis

USD/CHF is currently trying to settle in the new range between 20 EMA and 50 EMA. The previous resistance level at 0.9520 has become a support level, while the pair’s failure to sustain gains above 0.9620 means that this resistance level is intact.

Further upside in USD/CHF will most likely demand that U.S. Dollar Index moves above 100. The upcoming Swiss National Bank monetary assessment is also very important for the pair.

At this point, the upside trend in USD/CHF is intact but the easy part of the rebound is over and the pair will need more stimulus to settle above 0.9620.

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