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fundamental and technical analysis of USDCHF

September 2, 2020

September 2, 2020

Analysis of USDCHF and forecast for the Swiss franc’s priceMikhail Hypov

This article will examine in detail the Swiss franc’s state. I’ll provide fundamental and technical analysis,make a forecast for USDCHF for September, the end of the year and next year.

The article covers the following subjects:

Fundamental analysis

The Swiss frank is a specific currency. In the first place, the reason for that is the “safe haven” status that the Swiss franc owes to the Swiss banking system’s impeccable reputation and reliability, and the country’s economic and political stability.

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][1]

The evolution of the Swiss National Bank (SNB)’s interest rate is shown in the chart above. The refinance rate dropped below zero five years ago, approximately. Switzerland remains the country with the lowest refinance rate, even if the trend of lowering rates has become global. The value of -0.75% was set already in 2015 and hasn’t changed ever since. This decision allowed the government to top up the budget with huge amounts of money, because of the Swiss banking system’s super- profits. A Swiss bank account holder has to pay for opening an account and maintaining it in Swiss francs. However, there’s a dark side to every story. A more expensive franc affects export sectors that account for 50% of the total industrial production. The low interest rate limits the Central bank in term of its currency rate control measures.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][2]

In fact, the only thing the SNB can do is activate the printing press. The chart above shows that the M2 money supply has been growing since March 2020 amidst the pandemic-driven economic crisis. This dynamics is due to a bigger demand for the Swiss franc among the non-residents during these crisis times. However, every crisis has its end, and the demand will fall. People will want to spend more, and they will sell their francs. As it’s almost impossible to raise the rate, the SNB may face an excess of francs. Though this is a mere hypothesis, the investors who hold Swiss francs as their main currency need to consider these risks.

Compared with other European countries, Switzerland feels better.

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][3]

The Bloomberg analysts note that Switzerland’s Q2 GDP slump was only 8.2%, which is less than 18.5%  in Spain and 13.8% in France.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][4]

Checking the aggregate numbers, we see that Switzerland lost only 10.5% GDP in total.

A shorter self-isolation period allowed the country to avoid more severe economic consequences. The Swiss economy is less dependent on tourism, its GDP share being only 1.8%. At the same time, the share of pharmaceutical companies in Switzerland’s industry is comparable to the car industry’s one in Germany. Obviously, the pharma sector will be flourishing in the pandemic’s conditions.

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][5]

Still, the Swiss economy has been in a deepest recession since 1970, according to the report of Swiss State Secretariat for Economic Affairs. Based on the current estimates, the final GDP slump will be about 6% in 2020. At the same time, Credit Suisse Group AG’s expectations that the Swiss budget deficit will be less than 30 billion CHF are optimistic. It’s the number that Head of the Department of Finance Ueli Maurer mentioned earlier.

As a conclusion, I can say that the general market situation is quite tense. Since the Swiss economy depends on the global one, it can endure significant losses. However, the country was prepared for the crisis better than others, and the recovery process may be faster than expected. Switzerland’s gold reserve is the world’s seventh biggest, while the total volume of gold/forex reserves is one trillion USD. In the absence of debt load, Switzerland can stand up to the global economic crisis.

Technical analysis

In my previous article I [mentioned][6] the importance of analysing DXY, the dollar index, as it’s the main factor in dollar pairs’ rate changes.

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][7]

The Swiss franc isn’t an exception. The chart above shows that its correlation with the index is close to 1. So, it’s important to understand the situation around the USD to make a correct forecast for the [USDCHF][8] pair.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][9]

In [last week’s article][6] I mentioned the index’s global trends.  I drew your attention to the global bearish trend in a descending triangle.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][10]

However, DXY is at it historic lows and near strong support levels locally. I expected consolidation inside the local triangle and a short bullish correction.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][11]

The market behaved in a different way and updated the historic high.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][12]

On the monthly time frame, the DXY index broke out an important local bullish trend. The next important support level is at February 2018’s low at 88.25 points. Pivot Fibonacci’s S3 level is broken too. On the one hand, it indicates that the dollar is oversold; on the other hand, it points to a strong bearish impulse.

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][13]

There’s no significant support on the H4 time frame. Pivot Fibonacci’s S3 monthly level is at around 90.73.   The index is starting a new month under the balance level, so a movement to the S3 limit is an appropriate scenario. The lower limit of the channel is nearby too, which is a magnet for the index from the technical point of view. At the same time, none of the oscillators is giving a reversal signal. All has been directed downwards so far.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][14]

Now let’s move to the analysis of USDCHF.  Like DXY, the pair broke out a strong support level in the form of an ascending trend line. February 2018’s low is broken too. The next important level is at 0.70 CHF, near the historic low of 1 August 2011. ![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][15]

The chart above compares the DXY index and the [USDCHF][8] pair. The dynamics of these two instruments have been almost identical since 2020. There are no strong support levels and trend reversal signs for the Swiss franc at the moment.![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][16]

The daily chart above shows a bearish picture, like for the DXY index. USDCHF is below the monthly Fibonacci Pivot balance level. MACD is finishing to correct and it is reversing down. There is no serious divergence. ROC TD is in the balance zone and may go down.

On the whole, all those signals point to a further slump.

USDCHF’s scenario for 2021

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][17]

The 2021 scenario for the USD looks bearish. [USDCHF ][8] went outside a rising wedge.   This pattern’s nearest target is its bottom. So, the bearish correction can move to 0.766 CHF / 1 USD. January 2015’s low may suspend the fall, and we may see the pair consolidating at 0.827 - 0.880 CHF until the end of 2021. The situation will become clearer in January.

Trading plan for USDCHF for the end of 2020

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][18]

USDCHF is in a strong bearish trend. The nearest target is at around 0.880 CHF. If the dollar’s devaluation rate doesn’t get faster, the pair may be consolidating at that level till the end of the year.

Trading plan for up to the end of 2020:

  • Short position from the current levels. The perfect sell level is at the upper limit of the channel at 0.907 CHF. 
  • The short position’s target is at the support level of 0.880 CHF.
  • Stop loss is required in case the pair goes outside the bearish trend. It should be trailed down as the price reaches the target. The initial value is at about 0.917 CHF.

Trading plan for USDCHF for September 2020

![LiteForex: Forecast for Swiss franc: fundamental and technical analysis of USDCHF][19]

If you act fast, you can manage to open a short position this week:

  • Enter at about 0.900 CHF.
  • Target: the channel’s and S3 lower limit at 0.8868 CHF.
  • Stop loss should be placed beyond the balance level of monthly Pivot at 0.910 CHF.

The Profit/Risk ratio of 1.61 isn’t the best one, so enter with a small lot.

The next promising trade is at the retracement from the bearish channel’s lower limit. The opening date is approximately in the middle of the month.

  • The level for opening long positions is near the S3 support line at 0.886 CHF.
  • Stop loss is placed outside the bearish channel and support level’s limits at 0.880 CHF.
  • Target: 0.908 CHF.

The Profit/Risk ratio of 3.13 is much better.  Please remember to observe your personal risk management rules.

If you are just starting to trade, try a demo account first. [Trade][8] with the leader of the Forex service market in 1 click without registration.

Good luck and profits, everyone!

Yours,

Michael @Hypov

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][20]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][21] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of USDCHF in real time mode

![Analysis of USDCHF and forecast for the Swiss franc’s price][22]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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