Investments in the Swiss franc this year proved to be as reliable as Swiss watches. The CHF confirms its status as a safe asset because we observe a steady downtrend. At the moment, the franc has strengthened against the dollar by more than 9%, and given that before the end of the year, there is a chance that investing in the franc will become even more profitable for those who chose this currency.
During this week, the franc has been strengthening not only due to external factors, but also due to the economic indicators of Switzerland. GDP data for the third quarter showed rapid growth of 7.2%, fully compensating for the 7% contraction of the economy in the second quarter of 2020. Thus, we can talk about an almost complete recovery of the economy affected by the pandemic. The 7.2% jump was the biggest since 1980 and exceeded expectations by 1.2%. It can be stated that Switzerland coped with the crisis better than any other European country. Another news was the growth of the PMI index of business activity in the manufacturing sector to 55.5 pips in November.
At the moment, the rates have reached a 6-year low and continue decreasing. Of course, the rapid strengthening of the franc was possible due to the weakening of the dollar and hopes for the introduction of a stimulus package for the US economy, the adoption of which was impossible before the victory of Joe Biden in the US election. So far, macroeconomic reports on the US economy do not support the dollar because the epidemiological situation also has a negative impact. However, the situation may change today with the publication of the unemployment report, as well as the trade balance for October.
Starting trading with the USD/CHF, it should also be taken into account that the rates are now at lows and in the oversold zone. Therefore, the probability of a price correction is very high. The range of quotes is narrowing, and the support line cannot move indefinitely. However, we assume that the rates can decrease a little more in the absence of incentives for the USD. Most of the tools of technical analysis also remain committed to trading on the trend. Such deals can definitely be effective in the short term, although the decline will be limited. The pair being at a minumum, we should pay attention to the perspective of opening the deals to BUY in long-term trading. Trades against the trend can be considered more promising, but you should be ready for a drawdown of up to 100-150 pips.
