Daily Market Recap - USDCHF

The Swiss franc fell by over 0.70 percent against the US dollar on Tuesday as market optimism and a sudden pickup in US dollar demand boosted the USDCHF pair.

Sight deposits at the Swiss National Bank (SNB) rose by a significant amount last week, indicating the SNB may be actively intervening in the forex markets to limit further increases in the value of the Swiss franc.

Like gold, the Swiss franc is typically traded as a safe haven asset which tends to increase during times of uncertainty. Commercial banks have recently increased their deposits at the SNB as a precautionary measure to shield them from the global recession, which caused the Swiss franc to appreciate it.

However as the SNB targets an adequate exchange rate of 1.05 CHF to EUR, the central bank is constantly forced to engage in market activities to avoid unwanted appreciation in its currency. The result of which has been felt today as the Swiss franc fell across the board.

Looking at the economic data released earlier, the Swiss consumer price index came in below expectations signaling further pressure on the Swiss economy. Plans for further monetary stimulus by the SNB will continue to weigh on the value of the Swiss franc in the short term.

(Chart Source: Tradingview 05.05.2020)

From a technical perspective, the USDCHF looks set to meet some strong resistance at current levels given the large upswing seen this afternoon. The resistance point to cross will be the 0.786 Fibonacci retracement level at 0.97288. Should the pair manage to close above that point, bulls may be tempted to push towards last weeks high of 0.980. On the flip side, support should be felt around the 0.9625 marks, with stronger support in extension at 0.95537.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.