Swiss Franc Short-term Outlook: USD/CHF Breakout Faces First Major Test

Swiss Franc Technical Forecast: USD/CHF Short-term Trade Levels

• USD/CHF has rallied more than 3% from the May lows with bulls now testing the first major resistance hurdle- risk for inflection.
• A sustained move higher looks to challenge the yearly range high.
• Failure at resistance could trigger a pullback within the developing recovery structure.
• May event risk next week with the SNB & Fed rate decisions on tap.
• Resistance 7921/26 (key), 7994, 8041- Support 7873/75, 7840, 7814/17 (key)

USD/CHF has extended its recovery after clearing the May range highs and reclaiming the yearly open, with the first major resistance hurdle now coming into view. While the move keeps the multi-week uptrend intact, building momentum divergence is beginning to emerge as price approaches a key technical inflection zone. With the FOMC and SNB decisions on tap next week, the reaction here could prove pivotal for the broader recovery. Battles lines drawn on the USD/CHF short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this USD/CHF setup and more. Join live on Monday’s at 8:30am EST.

Swiss Franc Price Chart – USD/CHF Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CHF on TradingView

Technical Outlook: In last month’s Swiss Franc Short-term Outlook we noted that USD/CHF had, “broken the May opening-range high with the bulls attempting to validate a breakout of a multi-week downtrend. From a trading standpoint, losses should be limited to 7814 IF price is heading higher on this stretch with a close above 7926 needed to fuel the next major leg for of the advance.” USD/CHF pulled back into the close of the month with price registering a close low at 7810 before rebounding sharply into June. The rally has extended more than 3% from the May low with a breakout above pivotal resistance at 7926 fueling this last leg of the advance.

The rally is testing resistance for a second time today at the yearly high-day close (HDC) at 7994. The weekly opening range is set just below- look for the breakout to offer near-term guidance here. The focus is on possible exhaustion / price inflection off this mark with the May uptrend vulnerable while below this threshold.

Swiss Franc Price Chart – USD/CHF 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CHF on TradingView

Notes: A closer look at Swisse price action shows USD/CHF trading within the confines of an ascending pitchfork extending off the late-May low with the 75% parallel further highlighting resistance near the 80-handle. Ongoing momentum divergence is highlighting waning momentum here, but the immediate focus remains on a breakout of the weekly range.

A break below the weekly range lows would expose initial support at the yearly open and the 61.8% retracement of the November decline at 7926/27 backed closely by the 200-day moving average, currently at ~7908. Near-term bullish invalidation is now raised to 7873/75- a region defined by the October and November lows, the December close low, and the 38.2% retracement of the January advance. Losses below this threshold would suggest a more significant high is in place and a larger trend reversal is underway towards the objective monthly open at 7810.

A topside break of the weekly range exposes the next major resistance hurdle at the 61.8% extension of the January rally and the January swing high at 8033/41. Note that the upper parallel converges on this zone over the next few days and a close above this slope would be needed to validate a breakout of the yearly opening range and fuel the next major leg of the advance. Subsequent resistance objectives eyed at the November high-day close (HDC) at 8100- look for a larger reaction there IF reached.

 

Bottom line: The breakout is now testing initial resistance, and the threat remains for possible inflection off this zone. From a trading standpoint, losses should be limited to the 200-day moving average IF price is heading higher on this stretch with a close above 7994 needed to fuel a rally toward the yearly high.

Keep in mind the FOMC and SNB rate decisions are on tap next week. While central banks are expected to leave rates unchanged, this will be Kevin Warsh’s first meeting as Chairman and the markets will be taking cues as to his tone on policy amid ongoing concerns regarding the inflationary outlook. Traders will also be looking to possible changes in Fed communications as we await the central bank’s updated Summary of Economic Projections. Stay nimble into the release and watch the weekly closes for guidance here. Review my latest Swiss Franc Weekly Forecast for a closer look at the longer-term USD/CHF technical trade levels.

USD/CHF Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex