The Swiss National Bank unexpectedly cut interest rates by 50 basis points yesterday, contrary to expectations of a 25-basis point cut. This reduction takes the rate from 1.00% to 0.50%, marking the fourth consecutive cut this year after three 25-basis-point reductions.
The US dollar continues its upward trend against the Swiss franc for the fifth consecutive day, reaching 0.8930 today, the highest level since November 25, 2024. It is currently hovering near the 0.8925 level. The US dollar has appreciated by about 6% against the Swiss franc since the beginning of the year.
The Consumer Price Index (CPI) year-on-year for November 2024 showed a growth of 0.7%, below expectations (0.8%) but higher than the previous reading (0.6%). Retail sales also declined year-on-year, showing a growth of 1.4%, which is lower than the expected 2.6% and the previous reading of 1.8%. Additionally, the Purchasing Managers’ Index (PMI) for November declined, recording a contraction of 48.5 points, which is lower than the expected 49.6 and the previous reading of 49.9.
These figures indicate weakness in the Swiss economy, which may require further interest rate cuts in the coming period.
It is worth mentioning that an important factor has given positive momentum to the USD/CHF pair, which is the strength and resilience of the U.S. economy, especially with the Producer Price Index (PPI) surpassing analysts’ expectations yesterday on a year-over-year basis, as it recorded 3.0% in November, while expectations were at 2.6%
As for the technical side, if the pivot point of 0.8889 is broken for the USD/CHF pair, there is a possibility it will target support levels of 0.8848, 0.8775, and 0.8734. However, if the pivot point is surpassed, it may target resistance levels of 0.8962, 0.9003, and 0.9076.
The Relative Strength Index (RSI), which is currently at 64, indicates positive momentum for the USD/CHF pair.
The Positive Directional Indicator (DMI+) stands at about 29 points, compared to the Negative Directional Indicator (DMI-) at approximately 14 points. We notice a significant gap between these two indicators, which suggests strong buying pressure on the USD/CHF pair. Most importantly, the Average Directional Index (ADX) is at about 35 points, indicating that the upward momentum of this trend is strong.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
