Swiss Franc Forecast: USD/CHF Battle Brewing at Key 50DMA

USD/CHF retesting the 50DMA from below after last week’s drop.
RSI, MACD signal downside risk, but morning star pattern hints at a rebound.
Break above 0.9050 could open 0.9155, while failure risks a slide to 0.8920.

Summary

USD/CHF is again testing the 50-day moving average (DMA)—this time from below—offering potential trade setups depending on how price action evolves around this key level. With little on the economic calendar this week in either the US or Switzerland, and having temporarily disconnected from its primary driver of yield differentials, technical signals take on greater importance in assessing directional risks.

USD/CHF Battle Brewing at 50DMA?

Source: TradingView

The three-candle evening star pattern completed last week has so far led to only limited downside, but it did break through key levels—first shattering uptrend support established in September before slicing through the 50DMA. However, the move stalled ahead of the January 27 swing low of 0.8966 before rebounding to retest the 50DMA from below, forming a three-candle morning star pattern in the process—often seen near bullish turning points. That should have traders on alert for a potential break above the 50DMA.

However, RSI (14) continues to set lower lows, and MACD remains in a downtrend, generating a bearish signal on price momentum. As such, I remain neutral on directional bias. But with price hovering near the 50DMA—a level that’s often respected—it presents potential trade setups.

If USD/CHF fails to break and hold above the 50DMA, shorts could be established beneath the level, with a stop above horizontal resistance at 0.9050 for protection. Possible targets include 0.8966 and a support zone from around 0.8920 down to 0.8895.

Alternatively, if USD/CHF breaks and holds above the 50DMA, longs could be considered above 0.9050 with a stop beneath for protection. For this setup to work, the price would need to clear the former uptrend, putting a retest of the February 12 swing high at 0.9155 and the recent cycle peak of 0.9200 in play.

CHF Disconnects from Yield Differentials

Source: TradingView

Unlike in the recent past, USD/CHF has shown little correlation with US Treasury yields or US-Swiss yield differentials across various tenors over the past month. It still retains a relatively strong correlation with EUR against the USD, though that’s been weakening.

With little major event risk on the calendar in either nation this week, traders may want to place greater emphasis on price signals when assessing potential setups.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.