USD/CHF: Key Levels to Watch Amid Steady Recovery of Swiss Economy

Summary:

USD/CHF is on an ascending channel despite the string economic data from Switzerland. Talks on the Fed tightening its policy are the other driver.

USD/CHF is trading lower as a reaction to the higher-than-expected CPI index. On Wednesday, the country’s CPI reading came in at 0.3%; up from the previous -0.2%. While it is still below 2% target set by Swiss National Bank.

Monday’s manufacturing PMI data further highlights the steady recovery of Switzerland’s economy. According to Prochure.ch, April’s manufacturing PMI rose to 69.5 from the previous month’s 66.5. Notably, this is the highest number on record; an indication that the country’s manufacturing sector has expanded significantly.

Despite the strong economic data from Switzerland, talks on the need for the Federal Reserve to hike interest rates have retained USD/CHF within the ascending channel. On Tuesday, the Treasury Secretary, Janet Yellen stated that the Fed may need to gradually tighten its monetary policy to prevent overheating of the economy. A hawkish policy would be a bullish catalyst for the pair.

USDCHF Technical Outlook

USD/CHF is trading within an ascending channel, which spans from late April. On an hourly chart, it is above the 25 and 50-day exponential moving averages. At the time of writing, it was down by 0.08% at 0.9129.

I expect the pair to remain within the channel in the near term. On the upper side, it is likely to experience resistance at 0.9168 while finding support at 0.9134. A move above that resistance level will place the next target at 0.9181.

However, this thesis will be invalid if the pair moves past 0.9120 on the downside. If that happens, the bears will be trying to retest the support level at 0.9080.