The USD/CHF exchange rate dropped to a low of 0.8863, the lowest level since February 2021. It has plunged by more than 12.4% from the highest point this year. This decline has coincided with the sharp decline of the US dollar index (DXY) and US government bond yields.
DXY index plunge continues
The USD to CHF price has been in a strong downward trend in the past few months as the dollar index has tumbled by almost 15% from the highest point in 2022.
This performance has also coincided with the ongoing shift to a risk-on sentiment as evidenced in the strong Bitcoin and cryptocurrency prices. Bitcoin price has jumped above $30,000 while Ethereum has soared above $2,000.
The US dollar index has plunged by almost 15% as concerns that the Federal Reserve will start pivoting soon. This view was confirmed by the latest American consumer price index (CPI) data. Economic numbers showed that the headline consumer inflation dropped to 5.0% from last week’s high of 9.1%.
The minutes published on Wednesday showed that officials believe that the American economy will contract in the fourth quarter because of the banking crisis. Also, some members of the committee wanted to pause interest rate hikes.
Therefore, there is a likelihood that the Fed will hike interest rates by 0.25% in May and then pause interest rates this year. This explains why the USD has dropped against most currencies, including the euro, pound, and Japanese yen.
Meanwhile, there are signs that the Swiss economy is doing well even as the Credit Suisse collapsed. Data published on Friday showed that the headline producer price index (PPI) dropped from 2.7% to 2.1% in March.
USD/CHF technical analysis
USD/CHF chart by TradingView
The daily chart shows that the USD/CHF pair has been in a strong bearish trend in the past few months. It moved below the important support level at 0.9088, the lowest level on March 14 and February 3. It has dropped below the 50-day and 100-day moving averages while the Relative Strength Index (RSI) moved to the oversold level.
Therefore, there is a likelihood that the pair will continue falling as sellers target the key support at 0.8700. A move above the resistance point at 0.9088 will invalidate the bearish view.
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