USD/CHF Daily Forecast – Swiss Frank Tries To Gain Ground After Fed Rate Cut

The U.S. Federal Reserve (Fed) has decided to cut rates in an emergency meeting as coronavirus starts to put more pressure on the U.S. economy. The Fed also announced that it will launch a new quantitative easing (QE) program, buying $500 billion of Treasuries and $200 billion of mortgage-backed securities.

Not surprisingly, the U.S. 10-year bond yield has declined further into the sub-1.00% territory as investors rushed to buy the safe-heaven asset ahead of the massive Fed purchases.

U.S. stock market futures have reached their daily loss limit as concerns about the impact of the coronavirus on the U.S. economy continue to grow. The U.S. Treasury Secretary Steven Mnuchin stated that the coronavirus pandemic will cause a slowdown in the U.S. economy but added that he did not expect any recession.

In my opinion, his position is too optimistic as many U.S. industries are going to take a material hit in the upcoming weeks. Airlines, hotels, casinos, non-food retailers are already under pressure, while the European-style lockdown has not been implemented yet.

In these circumstances, some near-term pressure on the U.S. dollar looks like a logical outcome as the U.S. economy has significant recession risks and the U.S. yields are drifting towards zero.

Meanwhile, the Swiss frank can enjoy some boost from its safe-heaven status although it remains to be seen whether Switzerland can limit the negative impact from the lockdown in many European countries.

Technical Analysis

Despite the pressure from the Fed rate cut, USD/CHF upside trend is intact. Currently, the pair met resistance at 20 EMA above 0.9500. If this level is breached, USD/CHF will have room to move above 0.9600, closer to the 50 EMA.

The Fed has fired its bullets, so market participants should not expect any major moves in the coming days. The “bad news” for the dollar may only come from the side of the U.S. economy if the situation with coronavirus continues to worsen.

If this happens, the rush to find alternative safe heaven assets could push USD/CHF below 0.9400, breaking the current upside trend and leading to the continuation of the downside move that we’ve seen in early March.