The USD/CHF exchange rate pulled back slightly on Tuesday ahead of the upcoming Swiss GDP and US consumer confidence numbers. It dropped to a low of 0.9344, which was a few points below last week’s high of 0.9428.
Swiss GDP and US consumer confidence
The Swiss franc had a difficult performance in February as the US dollar index made a spectacular comeback. It crashed by more than 4% between its highest and lowest levels during the month. The dollar index rose from about $100 to over $105 after the US published strong jobs, inflation, home sales, and retail sales numbers.
The main catalyst for the USD/CHF pair will be the upcoming US consumer confidence data by Conference Board. Economists polled by Reuters expect that the overall confidence among consumers rose modestly in February as inflation eased slightly.
Consumer confidence is an important figure because of the role that consumer spending plays in the American economy. It is the biggest contributor to the country’s GDP. As such, highly confident consumers tend to spend more, which will give the Fed more incentives to tighten.
The USD/CHF price will also react mildly to the latest Swiss GDP number. Economists believe that the Swiss economy did relatively well in the fourth quarter as it expanded by 1% on a year-on-year basis. This growth was mostly driven by strong exports.
The Swiss National Bank has hinted that it will continue hiking interest rates in the coming months as it deals with the elevated inflation. The headline consumer price index (CPI) has jumped to over 3%, the highest level in over 30 years. It remains significantly below that of other countries, including the US.
USD/CHF forecast
The 4H chart shows that the USD to CHF exchange rate rose to a high of 0.9427 in February. It has now pulled back slightly as buyers start taking profits. The pair remains above the 25-day and 50-day moving averages.
It is also above the key support at 0.9290, which was the neckline of the inverted head and shoulders pattern. The USD/CHF price has also retreated below the key support at 0.9400, the highest point on January 6.
Therefore, the pair will likely continue falling briefly, which will see it retest the support at 0.9330. A drop below that level will bring the next support at 0.9290 into view.
The post USD/CHF forecast: Temporary pullback as DXY retreats appeared first on Invezz.
Source: https://invezz.com/news/2023/02/28/usd-chf-forecast-temporary-pullback-as-dxy-retreats/