The Swiss Franc (CHF) sold off in most of its major pairs on Friday after the release of a better-than-expected US jobs report supported risk appetite, driving flows away from the safe-haven Franc. The Swiss Franc has lost 0.56% against the US Dollar, while it is down 0.24% and 0.28% against the Euro and Pound Sterling, respectively.
USD/CHF – the number of Swiss Francs that one US Dollar can buy – is trading higher on Friday after the release of Nonfarm Payrolls.
The pair is rising after having completed a Measured Move price pattern during October and November. Measured Moves are three wave patterns that look like large zig-zags. The first and third waves are usually of a similar length. Wave C completed after achieving the same length as A. This further reinforces the bullish reversal since the December 4 lows.
US Dollar vs Swiss Franc: Daily Chart
The MACD has completed a bullish cross (circled) in negative territory, adding more evidence, signaling potentially more upside on the horizon.
The short-term trend is bullish, and more gains are possible. The next target is at 0.8825, which offers soft resistance. Then comes the confluence of major moving averages residing at 0.8900, where tougher resistance is expected.
A break below the 0.8667 lows would negate the recovery and see bears back in charge, with likely losses to the 0.8552 July lows.
EUR/CHF – the number of Swiss Francs that one Euro can buy – has rebounded after touching its lowest level for the year.
Thursday saw the formation of a Bullish Engulfing Japanese candlestick reversal pattern (see rectangle on chart below) at a major support and resistance level, after the pair recovered from record lows. For the candlestick pattern to be confirmed, it would have to be followed by a green bullish day on Friday. This would provide a short-term bullish reversal signal.
Euro vs Swiss Franc: Daily Chart
The pair is in a downtrend on all key timeframes (weekly, daily, 4hr), however, suggesting bears have the upper hand overall and prices remain at risk of capitulation.
A break below the 0.9403 lows would reconfirm the bearish bias and see prices fall into uncharted territory, with major whole numbers then expected to provide support at 0.9300, 0.9200, and so on.
GBP/CHF – the number of Swiss Francs that one Pound Sterling can buy – is in a sideways trend on short and long timeframes, whilst the medium-term trend could be classified as very marginally bullish.
On the 4-hour chart used to analyze the short-term trend, the pair is bouncing up and down within the parameters of a range-corridor between 1.0990 and 1.1155.
Pound Sterling vs Swiss Franc: 4-hour Chart
More recently it seems to have found a floor at the lows of this range. The pair has just formed a bullish Hammer Japanese candlestick formation (see rectangle in chart above) and is seeing strong bullish follow-through in the period that follows. This provides confirmation of the short-term bullish signal.
It is possible to see the outline of a complete measured move in the zig-zag of price action down from the November 29 high, with wave C completing at the November 7 low.
The MACD has risen above its signal line whilst well below the zero-line, further adding weight to the short-term bullish outlook. Indeed, looked at throughout December, the MACD looks like it might have formed a wide double-bottom bullish reversal pattern, further amplifying the strength of the current crossover buy signal.
All in all, the short-term chart suggests the GBP/CHF pair is turning around at the bottom of a range and beginning a bullish ascent back up to the range highs at 1.1155. A break above the 1.1040 level would provide further confirmatory evidence a new leg higher was underway.
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.