USDCHF Trades Higher As Swiss Government Downgrades GDP Forecast

Published by
Written By: Eno Eteng (MSTA)
Share
    Summary:
  • The Swiss Franc is under pressure as the Swiss government downgrades its GDP forecasts, sending the USDCHF higher on the day.

The Swiss Franc is under pressure this Thursday after the Swiss government released its latest forecasts which predict a contraction of the Swiss economy in 2020 by 6.7%. This news is sending the USDCHF higher, even as the US Dollar continues to attract bids as has been the case throughout the week.

A Reuters report which captured the forecast provided by the Swiss government indicates that the updated projections are for the GDP to contract by 6.7% in 2020, representing a 45-year low as a result of the impact of the coronavirus pandemic. However, recovery is expected in 2021, with the Swiss government projecting a growth of 5.2%.

The report also provided forecasts for inflation and unemployment, with inflation seen to drop to 1% and then 0.5% in 2020 and 2021 respectively. Unemployment is expected to stay at 3.9% in 2020 and rise to 4.1% the following year. 

The markets are reacting to the news by dumping the Swiss Franc in favour of the US Dollar in Thursday’s New York/London session overlap period. 

Download our Q2 Market Global Market Outlook

Technical Outlook for USDCHF

The USDCHF pair is currently pushing out of the upper barrier of the symmetrical triangle on the daily chart. The pair is trading at 0.97464 or 0.38% higher on the day. Today’s move is getting its propulsion from the bounce off 0.97139; previous support observed on 2 August and 29 August 2019, as well as 24 March 2020. This breakout move is presently aiming for the 0.97793 resistance, formed by prior peaks that formed on 15 August 2019 as well as 7-12 February 2020. The price projection from the triangle break is expected to take the USDCHF to the 0.98652 resistance, but this move will also have to contend not just with 0.97793, but also the 27 December 2019/24 February 2020 highs at 0.98116. 

On the flip side, failure to breach the initial target of 0.97793 may allow the USDCHF to experience a pullback, which is a usual occurrence in breakout moves. This pullback may then retest the support at 0.97139. A breakdown of this support that takes the USDCHF below the 0.96535 support invalidates the triangle breakout and opens the door towards 0.96274 (15 January and 3 February 2020 lows). 

Written By: Eno Eteng (MSTA)

Eno is a certified financial technician and member of the UK Society of Technical Analysts. He loves to trade and write about stocks, Forex, and CFDs. Since 2009, he has consulted several financial companies as a trader and strategy developer. His work can be seen on several forex blogs and trading educational websites.

Published by
Written By: Eno Eteng (MSTA)