The USDCHF pair declined slightly in reaction to the increasing hostilities between North and South Korea. The pair also declined because of the dark estimates by SECO about the Swiss economy. These estimates came less than two days before the SNB delivers its interest rate decision.
Worst performance in a decade
In a statement today, the State Secretariat of Economic Affairs (SECO) announced that Switzerland will go through the worst slowdown in decades. The expert group expects the current second quarter to be the worst for the economy in decades.
In all, the group expects the GDP to contract by 6.2% this year, which is slightly better than the April’s forecast of a 6.7% decline. They also expect the unemployment rate to be at 3.8% this year. On a positive side, they expect that the economy will recover in 2021 and expand by 4.9%. This forecast is below the 5.2% that was forecasted in April.
The committee warned that the economy could still contract at a faster rate than the current estimates.
SNB decision eyed
The USDCHF pair also declined slightly because of the upcoming decision by the Swiss National Bank (SNB). Most analysts expect that the bank will leave interest rates unchanged and possibly announce more accommodative measures. Still, there are some who believe that the bank could be motivated by the recent gains in the franc to push interest rates negative. Furthermore, the SNB governor had talked about negative rates before.
The USDCHF also declined after the current escalations in the Korean peninsula. Earlier today, South Korea announced that the Northern side had blown up the liaison office. It did this a week after the North warned that it could invade the south.
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USDCHF technical outlook
The USDCHF pair is trading at 0.9482, which is slightly below the Friday’s high of 0.9555. On the daily chart, the price is below the 50-day and 100-day exponential moving average. It is also below the important resistance level at 0.9596 and slightly above the morning star pattern that was formed on Thursday. Also, the price is above the 38.2% Fibonacci retracement level. Therefore, the pair may continue falling ahead of the SNB decision.
On the other hand, a move above the Friday’s high of 0.9555 will see the price continue rising.
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