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The Franc Remains Under Pressure

8/30/2022 3:37 PM

The USD/CHF pair continues to trade within the medium-term descending channel, but after a reversal at its lower border, the quotes have been showing growth for the last two weeks.

Currently, the US currency is still receiving support after a speech in Jackson Hole by the head of the US Fed, Jerome Powell, who promised to continue raising interest rates until a steady decline in inflation begins to the target level of 2.0% and leave them high even after reaching the level of "neutrality". Further tightening of monetary policy increases demand for the dollar, strengthening its position against its main competitors, especially since the US economy as a whole is coping with pressure: gross domestic product (GDP) is declining for the second quarter in a row, which corresponds to the definition of a technical recession, but high demand and strong labor market data, according to experts, do not give it become real. 

The Swiss franc still looks less attractive for investment, since the Swiss Central Bank is much slower than the US Fed. In June, the regulator raised the interest rate for the first time in many years, but it still remained negative at -0.25%. In the future, officials will probably be forced to continue tightening monetary policy, since inflation in the country has been above the target level of 2.0% for six months and amounted to 3.4% in July. Among the short-term pressure factors, it is worth highlighting today's publication of the August index of leading economic indicators from the Swiss Economic Institute (KOF), which again fell from 90.5 to 86.5 points, which is worse than forecasts of 89.0 points. 

The price has consolidated above the level of 0.9643 (Murray [3/8]), which gives the prospect of further growth to the levels of 0.9765 (Murray [4/8], the upper limit of the descending channel), 0.9887 (Murray [5/8]). The key for the "bears" is the middle line of the Bollinger Bands in the area of 0.9565, a breakdown of which may lead to a further decline to the levels of 0.9400 (Murray [1/8]), 0.9277 (Murray [0/8]).

The downward dynamics in the near future seems to be a less likely scenario, as the Bollinger Bands and the Stochastic are reversing upwards, the MACD histogram is increasing in the positive zone.

Resistance levels: 0.9765, 0.9887, 1.0009. | Support levels: 0.9565, 0.9400, 0.9277.

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