Swiss Franc Pairs: CHF hits new highs for the year vs. sinking Euro

The Swiss Franc strengthens versus the Euro after more negative data for the region.
Euro weakens to 2023 lows versus the Swiss Franc after GDP grinds to a halt in Europe, hammering the single currency.
US Dollar continues righting itself against the pack including Swissie; Pound recovers vs. CHF on brighter financials.

The Swiss Franc (CHF) trades mixed on Thursday – rising versus the Euro which sees losses after a slew of more unfavorable figures, but falling to the strengthening US Dollar, and to a lesser extent the Pound Sterling, which was briefly buoyed by a less morbid financial outlook.

EUR/CHF hits new lows for 2023 of 0.9403 and threatens to enter uncharted price territory below after Eurozone growth and employment data for Q3 disappoints, weighing on the Single Currency. USD/CHF and GBP/CHF show technical short-term reversal insignia, which suggests bulls may have taken charge in the short term.

Daily digest market movers: USD/CHF rises as Dollar recovery continues unabated

The Swiss Franc weakens against the US Dollar, which continues to recover after investors wake up to the fact the US may not have reached peak interest rates unilaterally, but rather be reflecting a wider global phenomenon.
The latest US employment data shows a marginally better-than-expected result.
Data out on Thursday shows an unexpected fall in Continuing Jobless Claims, which fell to 1.861 million in the week of November 24. A figure of 1.910 million had been expected.
Initial Jobless Claims for week of December 1 undershot expectations, coming out at 220K when 222K had been forecast.
The data slightly improves on the negative ADP employment data out on Wednesday.
The next big release for the US Dollar is Nonfarm Payrolls out on Friday, December 8.

Swiss Franc technical analysis: USD/CHF posts short-term reversal insignia

USD/CHF – the number of Swiss Francs that one US Dollars can buy – is trading higher for the fourth day in a row on Thursday.

The pair found a floor at key long-term range lows and then formed a bullish Piercing Line Japanese candlestick reversal pattern on Monday, December 4 (rectangle on chart below). This was then confirmed by Tuesday’s bullish follow-through.

US Dollar vs Swiss Franc: Daily Chart

It appears the pair has formed a measured move price pattern since the October 3 highs. 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 has completed after achieving the same length as A. This further reinforces the bullish reversal signaled by the Piercing Line.

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.

Daily digest market movers: EUR/CHF hits new low for the year

The Swiss Franc rises against the Euro after Eurozone economic data shows a deteriorating outlook for the region.
The Euro weakened considerably on Thursday after GDP data showed that the Eurozone failed to grow in Q3 and registered a 0.1% decline on a quarter-on-quarter basis when compared to Q2.
Employment Change data in the Eurozone was also disappointing, growing by a lower-than-expected 0.2% QoQ, when 0.3% had been expected, and 1.3% YoY in Q3 when experts had forecast 1.4%.
Last week, HICP inflation data for the Eurozone showed a greater-than-expected slowdown in price rises, which was a further sign of a slowdown.
The data suggested a risk the European Central Bank (ECB) might consider cutting interest rates to stimulate growth, which is weighing heavily on the Euro.
Lower interest rates tend to weaken a currency as they reduce capital inflows.

Swiss Franc technical analysis: EUR/CHF makes new year-to-date lows at 0.9403

EUR/CHF – the number of Swiss Francs that one Euro can buy – has fallen to its lowest level for the year at 0.9403 on Thursday. It has temporarily found its feet at a major support and resistance level but remains vulnerable to weakening to unprecedented levels – lows not seen for decades.

Euro vs Swiss Franc: Weekly Chart

The pair is in a downtrend on all timeframes, suggesting bears have the upper hand and prices should continue lower.

A break below the 0.9403 lows would further confirm 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.

Daily digest market movers: GBP/CHF supported by stable financial outlook

The Swiss Franc weakens versus the Pound Sterling pair, possibly as a result of the publication of a report by the Bank of England (BoE) suggesting the UK financial system has grown more resilient.
The Bank of England released its Financial Policy Summary and Record – December 2023, on Wednesday, December 6. The report concludes that UK businesses and households are showing greater resilience to the higher debt repayments associated with high-interest rates than was expected back in the summer.
The greater stability of the UK financial system suggests the BoE will be able to keep interest rates higher for longer without negatively impacting the economy. The UK is experiencing relatively high inflation so maintaining interest rates at current levels may be necessary to bring it down.
Higher interest rates are generally positive for a currency as they attract greater inflows of foreign capital.
This comes after a string of officials maintained a hawkish line supporting the Pound.
Interest rate-setter Megan Greene, for example, expressed concerns about persistently high inflation last week, indicating that interest rates might need to remain elevated for an extended duration.
The market view of the course of future interest rates in the UK, however, has turned more dovish in line with most of the rest of the world. Traders in interest rate futures now see a relatively high chance of the BoE cutting interest rates by 0.75% in 2024.

Swiss Franc technical analysis: GBP/CHF bouncing from range lows

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.

The pair is bouncing up and down within the parameters of a range-corridor between 1.0990 and 1.1155 on the 4-hour chart used for short-term chart analysis.

Pound Sterling vs Swiss Franc: 4-hour Chart

It has probably found a floor at the lows of this range after a string of bearish days. The pair turned around on Thursday after posting a bullish Doji Star Japanese candlestick formation (rectangle in chart above). This is a 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 low of the Doji Star pattern.

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 increased confirmatory evidence a new leg higher was underway.

Swiss Franc FAQs

What key factors drive the Swiss Franc?

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.

Why is the Swiss Franc considered a safe-haven currency?

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.

How do decisions of the Swiss National Bank impact the Swiss Franc?

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.

How does economic data influence the value of the Swiss Franc?

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.

How does the Eurozone monetary policy affect the Swiss Franc?

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.