USD/CHF Price Forecast: Aims to extend rally towards one-year high at around 0.8170
- USD/CHF retraces to near 0.8110 from its 10-month high of 0.8140.
- The Fed is highly anticipated to deliver at least one interest rate hike this year.
- SNB’s Tschudin still sees the need for the central bank’s intervention.
The USD/CHF pair trades 0.16% lower at around 0.8110 during the European trading session on Thursday after correcting from its 10-month high of 0.8140 posted the previous day. The broader outlook of the Swiss Franc pair remains firm due to continued outperformance by the US Dollar (USD).
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% lower to near 101.46, but is still close to its one-year high of 101.80 posted on Wednesday.
Traders see an 82% chance that the Fed will deliver at least one interest rate hike this year, according to the CME FedWatch tool.
Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT.
In the Swiss region, Swiss National Bank (ECB) officials still see the need for further Swiss Franc’s depreciation despite falling almost 4% against the US Dollar so far this month. SNB policymaker Petra Tschudin said on Wednesday that medium-term inflation pressures are unchanged and the central bank is ready to intervene in the FX market, if necessary.
USD/CHF technical analysis
USD/CHF trades lower at around 0.8110; however, the pair holds a bullish near-term bias as it remains above the 20-day Exponential Moving Average (EMA) at 0.8000.
The 14-day Relative Strength Index (RSI) hovers just below the overbought band near 69, suggesting strong but stretched upside momentum that could encourage consolidation after the latest spike.
On the topside, the one-year high at 0.8174 is the first meaningful resistance level, and a sustained break above this barrier would open the door for further upside towards 0.8200. Looking down, the 20-day EMA around 0.8000 is the key support level; a downside break below that level would lead to further downside towards the June 17 low at 0.7910.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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