FX Trading Idea – USD/CHF


Buy 0.9500 for 0.9750 with a stop below 0.9340. Time duration 1-2 months

Technical View

Price recently test the previous low at 0.93700 and was able to bounce up after the test. This is a sign of a strong support at this price location. We are likely to see the rally continues toward the Fibonacci 50% of the decline from the high at 1.0146 to the recent low at 0.9355.

Fundamental View

The Swiss National Bank recently hikes rate by 50 basis points from its previous rate of zero percent. However, when compared to the U.S. interest rate of 4%, the gulf in interest rate between these two countries is big. Interest rate differential is in the U.S. dollar favour and this is likely to aid the U.S. dollar against the Swiss Francs. Beside the current big different in interest rate differential, this gulf could also widen. The Fed is likely to hike interest rate in the coming months even if the pace of interest rate hikes slows down while the Swiss National Bank is unlikely to hike rate continuously in the coming months. The different path of rate hike is likely to keep the U.S. dollar stronger against the Swiss Francs.

Geopolitical risk is also likely to favour the U.S. dollar more than the Swiss francs. War in Europe between Russia and Ukraine is likely to drive more demand into the U.S. dollar compared to the Swiss francs. This war could even lead to a recession in Europe. This could aid the U.S. dollar. North Korea is another risk which will benefit the U.S. dollar. With North Korea firing more missiles, landing near to Japan and South Korea, the U.S. dollar is likely to be in demand due to its status as a safe haven currency.

An increase in COVID-19 cases in China has prompted Beijing to tightening restrictions. A tightening of restrictions is likely to affect the country GDP in the coming months. The rising cases have cast doubt on the hopes of an early easing in strict pandemic restrictions in China, which could lead to an economic slowdown in China. This is also likely to aid the safe haven U.S. dollar.

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