. USD/CHF Decline Decoded: Unveiling the 0.8560 Mystery

USD/CHF Decline Decoded: Unveiling the 0.8560 Mystery

02 Feb 2024

USD/CHF extends its downtrend as the US Dollar remains subdued, declining further to approximately 0.8560.

FUNDAMENTAL OVERVIEW:

  • USD/CHF continues its decline, with the US Dollar weakening due to subdued US yields.
  • Despite Swiss Manufacturing PMI improving to 43.1, it fell below the anticipated 44.5.
  • US Treasury yields encounter obstacles, with concerns arising from the stress in the commercial real estate portfolio of the regional bank New York Community Bancorp.

For the third straight session, USD/CHF faces a decline, slipping to around 0.8560 in European trading on Friday. Weaker US labor data contributes to the US Dollar’s decline, acting as a hindrance for the USD/CHF pair.

The Swiss Manufacturing Purchasing Managers Index (PMI), issued by the Trade Association for Purchasing and Supply Management, indicates a slight improvement in production growth in Switzerland. However, it falls short of market expectations, with the index rising to 43.1 in January from the previous 43.0, missing the anticipated reading of 44.5.

Recent economic developments reveal a decrease in Swiss Real Retail Sales and Consumer Demand, in contrast to an increase in Gross Domestic Product surpassing market expectations. Future projections for the year indicate an average inflation below the 2% threshold. The prevailing consensus anticipates the Swiss National Bank (SNB) to initiate its inaugural rate cut in September 2024.

The US Dollar (USD) is facing additional strain due to restrained US Treasury yields. The decline in US Treasury yields comes in the wake of reports from the regional bank New York Community Bancorp, highlighting heightened stress in its commercial real estate portfolio.

USD/CHF TECHNICAL ANALYSIS DAILY CHART:

Technical Overview:

USD/CHF is currently trading within a down channel.

USD/CHF is positioned below all Moving Averages (SMA).

The Relative Strength Index (RSI) is in the Selling zone, while the Stochastic oscillator suggests a Negative trend.

Immediate Resistance level: 0.8609

Immediate support level: 0.8556

HOW TO TRADE USD/CHF

Following a notable rise, USD/CHF encountered rejection, leading to a decline and initiating a downward channel with a pattern of lower lows. Currently, USD/CHF attempted an upside move but struggled to sustain, subsequently falling towards a crucial key support zone. A potential further downside is anticipated if this support zone is breached.

TRADE SUGGESTION- Stop Sell– 0.8545, TAKE PROFIT AT- 0.8455, SL AT- 0.8604.