Banking Woes Support CHF Bid

Analysis of the Swiss franc

The safe-haven appeal of the Swiss franc spurs currency appreciation

The Swiss Franc has emerged as one of the best performing currencies against the US Dollar in 2023 as expectations of lower interest rates in the US and the franc’s safe-haven appeal influence the fundamental outlook. The franc is up about 4.4% against the dollar in 2023 so far, and the trend is likely to continue if the US receives softer fundamental data – likely to start this week with an NFP print and next week with the latest CPI data.

Adding to the CHF’s bullish outlook is its safe-haven appeal amid the recent upturn in the US banking sector as two more potentially troubled lenders emerged after JPMorgan absorbed First Republic Bank. A domino effect led to massive falls in share prices for both PacWest Bancorp and Western Alliance, in a volatile week.

world currencies vs American dollarperformance since the beginning of the year

Source: Reuters, prepared by Richard Snow

USD/CHF Technical Levels and Considerations

SNB President Thomas Jordan maintained a hawkish stance on both inflation and interest rates in his talk of monetary policy, noting that the former is too high, and that the latter could go higher. The market’s implied interest rate expectations have picked up slightly in the aftermath, with markets currently seeing another 44 basis point hikes – suggesting that the final interest rate could emerge at 2%.

USD/CHF daily chart reveals the overall bearish trend as lower lows and lower highs remain the order of the day. Today, so far there seems to be a temporary reprieve as the dollar recovers from the previous sell-off sessions. The decline finds resistance at the 20 simple moving average (green line) which has been a dynamic support throughout the rapid decline. Support comes in at the area around 0.8850 followed by the swing low at 0.8820 and 0.8760.

USD/CHF daily chart

Source: TradingView, prepared by Richard Snow

The previously mentioned support level can be seen on the weekly chart, which corresponds to the support area that appeared in late 2020 and early 2021.

USD/CHF weekly chart

Source: TradingView, prepared by Richard Snow

Later this afternoon, we’ll have a better idea of ​​the US job market with an NFP print. The previous ADP signal revealed a big win to the upside but with the correlations between the two data sets, we’ll have to wait and see how many jobs were added in the month of April.

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– Posted by Richard Snow for DailyFX.com

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