USD/CHF drifts higher as US-Swiss monetary policy disparity grows

Ahead of Friday US jobs report, the USD/CHF has been among the strongest dollar pairs. This has been mainly due to a slumping CHF rather than a rallying USD.

Ahead of Friday US jobs report, the USD/CHF has been among the strongest dollar pairs. This has been mainly due to a slumping CHF rather than a rallying USD. Indeed, the EUR/CHF and GBP/CHF have both been rising while the CHF/JPY has been falling of late. The Swiss franc remains fundamentally weak owing to a dovish central bank. The SNB charges banks interest on deposits while keeping the benchmark interest rate below zero, at -0.75%, to dissuade CHF investments. The Fed meanwhile has started to reduce its huge balance sheet and is set to raise interest rates at least two more times this year. The disparity between the Swiss and US monetary policies therefore continues to grow. In theory, the USD/CHF should continue to rise over time, ceteris paribus.

Now from a technical perspective, the Swissy has created several bullish signals already. After forming a false break reversal pattern at 0.9260, the USD/CHF has subsequently broken back above the 2017 low of 0.9420/5, making several higher highs and higher lows in the process. Clearly this is bullish behaviour of price. As a result, the path of least resistance remains to the upside. If it now manages to cleanly break above 0.9595 resistance then we could see a continuation towards the next bullish objectives at 0.9655 (200-day moving average), 0.9705 (old support) and 0.9735 (last support pre breakdown). Support meanwhile comes in at just below 0.9510.

Source: eSignal and

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