USD/CHF muted near 50-SMA; What's next for Switzerland's U.S. exports?

Currently, USD/CHF is trading at 1.0002, up +0.13% or 12-pips on the day, having posted a daily high at 1.0026 and low at 0.9968.

Over the last 21-trading sessions, the US dollar struggled to exercise full control over the Swiss franc. The lack of 'verbal' incentives from the 45th President of the United states and almost, a full priced-in economic docket hasn't added any additional value or boost to the USD/CHF pair. However, the interest rate differentials and political uncertainties, tend to favor long-dollar positions. 

Historical data available for traders and investors, during January, indicates that USD/CHF pair had the best trading day at +0.80% (Jan.6) or 81-pips, and the worst at -0.98% (Jan.17) or 98-pips.

Swiss' U.S. exports on fire

Brian Blackstone, reporter at The Wall Street Journal, notes, "Switzerland’s exports to the U.S. surged last year to a record high, pushing the trade surplus higher and putting the Alpine export powerhouse in a potentially uncomfortable position amid rising protectionist sentiment in the U.S. The figures come alongside heightened attention brought by President Donald Trump to bilateral trade balances and the policies countries have pursued to weaken their currencies against the dollar to gain a competitive edge."

Meanwhile...in a not too far EU

Tim Wallace,  Economics correspondent at The Telegraph, reports, "The single currency is failing to bring its economies closer together, with the strong core nations pulling ever further ahead of the weak periphery - leaving the eurozone as a whole set for years of stagnation and political crises, according to analysts at credit ratings agency Moody’s. “Europe, which was meant to be a project of convergence of ideas, of policy approach, of economic strength, and of income is not delivery. What we see is divergence across Europe.”

He further writes, "He pointed to very strong growth in Ireland and terrible performance in Greece as the extreme cases, but also the sustained expansion in Germany and the Netherlands compared with underperformance in Italy. “You would hope for the opposite, for weaker countries to catch up but that is not taking place - quite the opposite,” Mr Hornung said."

Technical levels to watch

There is a valuable trading perspective between the franc and euro. Therefore, it is interesting to know about its behavior. Valeria Bednarik, Chief Analyst at FXStreet, notes,"The American dollar is finally showing some signs of life, recovering steadily against all of its major rivals, and despite positive macroeconomic figures released in Europe, in the form of the German's GFK Consumer confidence survey that jumped to 10.2 in February from a previous 9.9. The EUR/USD pair fell down to 1.0688 ahead of US data releases, with initial Jobless claims up to 259K against the 247K expected, and Wholesales inventories slightly higher also, at 1.0% against the expected 0.9%. The disappointing figures helped the pair to bounce modestly, but so far it holds below the 1.0710 figure, as the market waits for the Markit preliminary PMIs and New Home sales figures."

She further writes, "The pair has turned bearish in the short term, as in the 1-hour chart, the price is standing well below its 20 and 100 SMAs, with the shortest turning south, whilst technical indicators present strong bearish slopes near oversold readings. In the same chart, the price recovered from its 200 SMA, around 1.0690, with a break below the level favoring additional declines towards 1.0650/60, where the pair has a daily ascendant trend line. In the 4 hours chart, technical readings also favor a new leg lower, given that the price has broken below its 20 SMA and technical indicators entered negative territory."

In terms of technical levels on USD/CHF, upside barriers are aligned at 1.0027 (50-SMA, blue color) and above that at 1.0090 (100-SMA, red color). While supports are aligned at 0.9967 (low Jan.26) and below that at 0.9920 (horizontal support). On the other hand, Stochastic Oscillator (5,3,3) seems to retrace from the oversold territory, therefore, there is evidence to expect further dollar gains in the near term. 

On the medium-term view, the pair found support at 0.9968 (100-DMA, red color) if prices break and open below such significant support, then the next logical target for short-sellers clocks around 0.9859 (200-DMA, green color). To the upside, 1.0139 becomes a long-dollar challenge, only a break above that level would indicate the end of the corrective phase and a transition to re-test 1.0331 to continue its previous uptrend. 

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