USD/CHF: This is the reason why the Swiss franc has just climbed to its 2015 peak

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  • USD/CHF fell to its lowest level since 2015.
    Since April this year, the pair has fallen more than 12%.
    The decrease is mainly due to the overall weaker US dollar.

    Even after the disappointing inflation data, the USD/CHF pair resumed its downtrend. The pair is trading at 0.8990, its lowest level since January 2015.

    USD/CHF slides to 2015 low
    Swiss inflation remains weak

    The largest part of the developed world is experiencing a long period of low inflation. In a report yesterday, Eurostat said that the EU Consumer Price Index (CPI) fell by 0.3% in November. In the United States, the CPI also rose by only 0.2%, the lowest value in the last five months.

     

     

     

    Earlier today, data from the Swiss Statistics Office showed that the CPI fell by 0.2% in November, resulting in an annualized decline of 0.7%. The economists surveyed by Refinitiv expected prices to fall by 0.1% month-on-month and 0.5% year-on-year.

    Similarly, the core CPI fell by 0.2% after falling 0.1% in October. According to the Presidium, the weak consumer prices are mainly due to a sharp decline in international package holidays and hotel accommodation. On the other hand, prices of rental housing and foreign wine rose during the month.

    Other recent economic figures from Switzerland were positive. In October, retail sales rose by 3.1%, while the unemployment rate declined. In addition, the economy expanded by 7.2% in the third quarter, after contracting by 7.0% in the second quarter.

    Therefore, the weaker US dollar is the main reason why the USD/CHF is at its lowest level since 2015. In fact, the Dollar index has fallen to its lowest level in 2018 due to ongoing discussions about economic stimulus programs and relatively lower risk in the market. In a statement yesterday, MUFG analysts wrote

    “We are sticking with our idea of USD/CHF short trading to reflect our expectations that the USD is likely to weaken further following the favorable U.S. election results and positive news on vaccines.

    Technical USD/CHF outlook
    Technical Table USD/CHF

    On the weekly chart, we can see that the USD/CHF price has been in a steady downtrend for the past several months. It has fallen more than 12% since its April high of 1.0242. In July it also moved below the February 2018 low of 0.9192, which provided important support.

    In addition, the pair has been forming a bearish pennant pattern in recent weeks, which is shown in green. As you can try out on a free demo account, this pattern tends to bearish.

    The bearish trend is also supported by both the moving averages and the Stochastic Oscillator. Therefore, I expect the pair to continue to bearish as the bears try to breach the important support at 0.900.

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