The USD/CHF currency pair dropped during Friday’s European session and continued to stay near the significant support level of 0.9100 despite a strong US Dollar, buoyed by investor apprehension as Donald Trump’s inauguration draws near. The Swiss Franc traded stronger than its peers to cap off the week despite expectations of further monetary easing by the SNB to deal with low inflation. Meanwhile, the US Dollar gained amid anticipation of Trump’s economic policies and a minor increase in the US Dollar Index (DXY). On the technical front, the pair exhibits strong bullish momentum, with the Relative Strength Index (RSI) and moving averages favoring an upside toward 0.9300, though a breach below 0.9000 could signal further weakness.

KEY LOOKOUTS

• Despite SNB’s dovish stance, CHF gains momentum, outperforming major peers as market participants brace for potential interest rate cuts amid low inflation risks.

• The Greenback holds firm ahead of Trump’s inauguration, buoyed by investor optimism over the economic policies that are to be announced soon, even as dovish Fed bets increase following soft CPI data.

• USD/CHF is bullish with RSI in the overbought region, and a break above 0.9300 could be seen, but a fall below 0.9000 could lead to bearish moves.

• Traders focus on geopolitical and policy developments, with heightened volatility expected as the Swiss Franc and US Dollar react to economic shifts and central bank actions.

The USD/CHF pair faced downward pressure during Friday’s European session, testing the critical 0.9100 support level despite the US Dollar maintaining resilience ahead of Donald Trump’s inauguration. While the Swiss Franc gained momentum against its major counterparts, with market expectations of further rate cuts by the SNB to tackle low inflation risks, the US Dollar remained buoyant. Investor sentiment was cautiously optimistic, with the Greenback finding support in hopes of forthcoming economic reforms, including potential tax cuts and trade policies, despite softer-than-expected US CPI data.

On technical levels, it has bullish trends. The pair shows upside movements to 0.9300 based on 14-week RSI, which can break anytime and drop it to the disadvantageous side under 0.9000 support.

• As at Friday’s European session, this pair is currently close to holding support at around 0.9100 by the Swiss Franc over the US Dollar.

• Interest rate cut by the SNB to check the risk from low inflation might continue to send CHF bullish; therefore, their appeal is better.

• Despite softer December CPI data raising dovish Fed bets, the US Dollar remains supported by investor optimism ahead of Donald Trump’s inauguration.

• Traders are cautiously optimistic about potential reforms, including tax cuts and tariffs, expected to impact market sentiment and the USD’s performance.

• Indicators such as the 14-week RSI and the 20-week EMA suggest bullish momentum, with resistance levels near 0.9300 in sight.

• Further downward moves are likely if the breach below the psychological 0.9000 level is maintained, with the pair targeting around 0.8958 and 0.8900.

• USD/CHF’s course will be further complicated by the opposing monetary policy expectations between the SNB and the Federal Reserve, which will keep the market focused on economic news.

The USD/CHF currency pair lost marginal ground during Friday’s European session as it hovered near the psychological 0.9100 support area, while the Swiss Franc led its peers in gains. The Swiss National Bank is, therefore, not expected to ease off its dovish stance going forward, despite markets expecting deeper interest rate cuts in a view to combat risks of inflation remaining below target levels. This stance has strengthened the Swiss Franc; however, there is a close attention on the economics of prolonged ease in monetary terms. Despite these advances, the negative for the duo has been curtailed by a resilient US Dollar, which draws strength from still cautious optimism toward President-elect Donald Trump’s ascension to office and the expectations that come with that of economic reform.

USD/CHF Daily Price Chart

Sources: TradingView, Prepared By ELLYANA

In the US, the Greenback held firm with a softer than expected Consumer Price Index reading in December that left more room to bet on an accommodative Federal Reserve. The US Dollar Index (DXY) ticked higher, reflecting market confidence in Trump’s forthcoming policies, including possible tax cuts and trade initiatives. Technical indicators support a bullish outlook for USD/CHF, with the 14-week Relative Strength Index (RSI) suggesting strong momentum and a potential upside toward resistance levels at 0.9300. However, if the pair fails to hold above the psychological support of 0.9000, it could signal deeper corrections into November’s high of 0.8958 and December’s low of 0.8900. The differing monetary policy outlooks between the SNB and the Federal Reserve continue to shape the pair’s trajectory, keeping traders vigilant.

TECHNICAL ANALYSIS

The USD/CHF pair is trading near the critical support level of 0.9100, while technical indicators suggest a cautiously bullish bias. The 14-week Relative Strength Index (RSI) remains within the bullish range of 60-80, showing significant upward momentum, while the 20-week Exponential Moving Average (EMA) trends upward near 0.8900, bolstering the long-term uptrend of the pair. A break above the October 2023 high of 0.9244 can take the pair towards resistance at 0.9300 and the 16 March 2023 high of 0.9342. Conversely, a drop below the psychological support at 0.9000 could be a catalyst for further downside towards the November 2022 high of 0.8958 and the December 2022 low of 0.8900, which would make them two key levels that traders need to watch.

FORECAST

The USD/CHF pair will experience a blend of bullish and bearish action as it confronts some critical technical and fundamental factors. On the positive side, the duo may gather momentum if breaks decisively above the October 2023 high at 0.9244, opening the door for testing of round-level resistance at 0.9300. Further exhaustion may take the pair back to its 15-month high at 0.9342 as well with strong bullish gauges incorporating a rising 20-week EMA and an RSI in the robust momentum zone. Deeper gains will be further driven by investor optimism on contemplated US economic reforms and a hardy US Dollar.

Risk to the downside remains, with the psychological level of 0.9000 acting as a critical support level. A break below this point could spur further bearish pressure to take the pair to the November 2022 high of 0.8958 and the December 2022 low at 0.8900. Downside risks may be increased by unexpected changes in SNB monetary policy, better-than-expected performance of the Swiss Franc, or a decline in US Dollar sentiment on dovish Federal Reserve expectations. These levels should be watched closely by traders and followed for changes in market dynamics that can inform decision-making.