The USDCHF pair was relatively stable today even after the Swiss Federal Statistics Office released the first-quarter GDP data. The pair is trading at 0.9612, which is slightly above 0.9576, the lowest level yesterday.
Swiss economy slumps into recession
The USDCHF pair reacted to the disappointing data from Switzerland. According to the statistics office, the country’s GDP contracted by 2.6% in the first quarter after rising by 0.3% in the fourth quarter. The office blamed the contraction to the coronavirus pandemic, that affected consumer spending and exports.
The services sector saw most damage as companies like hotels and restaurants were closed to prevent the coronavirus pandemic from spreading. Trade and accommodation sectors declined by 4.4% and 23.6% respectively while transport and communications dropped by 5%. In the same quarter, exports declined by 4.4% while imports fell by more than 1.2%.
These numbers came a day after we received the April retail sales data from the country. In general, the retail sales declined by almost 20%, which was the lowest contraction on record.
Analysts believe that the Swiss economy will take a longer period to recover because of its reliance on exports. With most economies seeing less growth, there are chances that demand will be undesirable.
USDCHF and negative rates
The USDCHF pair is also reacting to news that the central bank may implement more negative rates in the country. The challenge for the bank is that it has been accused by the United States of manipulating the currency.
In a statement last week, the Swiss central bank governor said that the bank was considering pushing the rates significantly lower than they are. Their goal is to lower the value of the franc and make the exports relatively cheaper in the market.
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USD/CHF technical outlook
The USDCHF pair is trading at 0.9612. On the daily chart, the price is below the 50-day and 100-day exponential moving averages. It is also slightly above the 50% Fibonacci retracement level. The pair is also on a downward trend. Therefore, there is a possibility that the price will move lower as bears attempt to test the important resistance at 0.9590.
On the flip side, a move above 0.9700 will invalidate this trend. This price is along the 61.8% Fibonacci retracement level and the 100-day exponential moving average.