USDCHF Forecast: Evergrande, SNB, and Fed in Focus

The USDCHF price held steady at the highest level since April as Evergrande contagion risks remained. Investors are also waiting for the upcoming Swiss National Bank (SNB) and Federal Reserve (Fed) interest rate decisions. It is trading at 0.9325, which was about 4.40% above the lowest level this year.

Evergrande contagion risks

The USDCHF pair rose on Monday as the market remained concerned about Evergrande, the second-biggest real estate developer in China. The company, which has more than $306 billion in debt, has faced challenges paying the funds. 

Therefore, analysts expect the company to have no other option than to file for bankruptcy unless it secures a government bailout or it reaches a restructuring deal. A default on its financial obligations will likely have a domino effect on the Chinese economy. Besides, property development is one of the biggest components of the GDP.

At the same time, a default will hurt other real estate developers, who will struggle to raise capital from banks. It will also affect many suppliers and global investors in general. Therefore, the USDCHF is rising because of the contagion risks as investors rush to the safety of the US dollar.

This risk has already spread in other markets as well. For example, Asian and American equities have dropped sharply lately. Similarly, commodities like copper and iron ore prices have also declined.

Federal Reserve decision

The next key catalyst for the USDCHF is the upcoming Federal Reserve interest rate decision. The bank’s Federal Open Market Committee (FOMC) will start its monthly meeting on Tuesday and deliver its decision on Wednesday.

The decision comes at a time when the US economy is staging a slower recovery. Recent data showed that the economy created more than 235k jobs in August, lower than the previous month’s increase of more than 1 million. The unemployment rate declined to 5.2%, while wages rose to 4.3%. 

Meanwhile, inflation eased slightly in August as airfares, and new car prices declined. Retail sales, which are an essential part of the economy, rose sharply. 

Therefore, analysts expect that the Fed will maintain its interest rate at the current range of 0% and 0.25%. It will also provide clear guidance of its quantitative easing program. In previous statements, Jerome Powell said that the bank will likely start tapering this year.

SNB decision

The Swiss National Bank will also deliver its interest rate decision on Thursday. Like the Federal Reserve, analysts believe that the bank will maintain its interest rates unchanged at -0.75%. It will also sound optimistic now that the Swiss economy is staging a strong recovery. 

Still, the SNB will maintain a dovish stance in a bid to devalue the Swiss franc. In most of the previous rates decision, the committee has lamented about the strength of the Swiss franc. In theory, a strong franc is usually bad for the country’s economy because it impacts exporters.

USDCHF technical forecast

The daily chart shows that the USDCHF pair has been in a strong bullish trend in the past few weeks. The pair crossed the important resistance at 0.9273 on Friday. This was a notable level since it was the highest the pair has been since July. 

It was also the upper side of the ascending triangle pattern. Also, it has moved above the 25-day and 50-day moving averages. Therefore, the pair will likely maintain a bullish momentum as investors target the key resistance at 0.9350.