FX Trading Idea – USD/CHF


Buy 0.9250 for 0.9650. Stop at 0.8990. Time Duration 2-3 months

Technical View

Price has been moving in a gradual uptrend channel and is also supported by the rising 20EMA line. On the past 5 occasions where price dips below the 20EMA, price has managed to bounce back up again. The uptrend could send price higher to the next price resistance at 0.9650. Stochastic is rising and hinting at a bullish price trend. MACD remains above the zero line and is hinting at a bullish price trend. However, MACD is also hinting that the uptrend is not strong. If price stays above the 20EMA it is likely to move higher to test the previous low turned resistance point at 0.9650 in the next 2-3 months.

Fundamental View

The Swiss franc currently has the world lowest interest rate at minus 0.75%. The Swiss National Bank kept its ultra-expansive monetary policy unchanged after its meeting on 24 March 2022, bucking the current global market trend where central banks are hiking interest rate to tackle rising inflation. A strong Swiss currency as well as a tame domestic inflation has allowed the SNB to keep interest rate in the negative zone. On the other hand, the US dollar has an interest rate of 0.25% which effective gives the greenback an interest rate differential advantage.

The Federal Reserve has also indicated it will be raising interest rate during the year 2022. It has indicated it will be raising interest rate 3 times in the year 2022. However, market and recent developments have raised the number of hikes to 5 or 6 times by the end of the year to tackle surging inflation which is running at a 40-year high. The Swiss National Bank is expected to its monetary policy and interest rate unchanged for 2022, as a tame inflation and war in Ukraine is clouding the Swiss economy, keeping the SNB on hold. An increasing interest rate differential is likely to keep the US dollar stronger than the franc.

Geopolitical events are also unlikely to aid the Swiss franc. War in Ukraine, at the beginning had kept the safe haven Swiss franc stronger against the U.S. dollar. Six weeks after Russia invaded Ukraine, investors are getting used to the current situation. Unless the situation in Ukraine flared up, the Swiss franc will stay weak against the U.S. dollar. Other than the current Ukraine situation, there is no other geopolitical event that could help the franc at the moment.

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