Bullish Bounce in USDCHF as Oversold Conditions Take Hold

Economic

Forex

Summary:

USDCHF has reached the lower boundary of a descending channel, where price action has responded with an initial bullish reaction.

BUY USDCHF

Close Time

CLOSED

0.89052

Entry Price

0.90000

0.88500

0.79535 +0.00385 +0.49%

55.2

Pips

Loss

0.88500

Exit Price

0.89052

Entry Price

0.90000

The U.S. services sector continued to expand at a solid pace in February, with the ISM Services PMI rising to 53.5 from 52.8 in January, surpassing market expectations of 52.6.

Additional details from the report revealed that the Prices Paid Index, a key measure of inflation, increased to 62.6 from 60.4, while the Employment Index improved to 53.9 from 52.3, signaling resilience in the labor market.

Investors are increasingly concerned that tariffs imposed by former President Trump may slow U.S. economic growth rather than fuel inflation and expansion, as initially projected.

Supporting this view, the latest ADP employment change report for February highlighted the impact of tariffs on business operations. The data, released during North American trading hours on Wednesday, showed that the U.S. private sector added just 77K jobs, falling short of the 140K expected and well below the previous reading of 186K.

“Given the tightly integrated supply chains across the U.S., Mexico, and Canada under the USMCA agreement—particularly in the automotive sector—tariffs that remain in place for more than a week or two are likely to have a meaningful impact on growth,” Citi noted in a report.

The bank also forecasts a 0.1% decline in real GDP for the first quarter and anticipates that the Federal Reserve (Fed) will resume its policy easing cycle in May, following the pause in December.

With tariffs now in effect, inflation cooling, stock markets under pressure, and consumer spending weakening, Citi sees a growing likelihood of a Fed rate cut in May.

Meanwhile, 25% tariffs on Canada and Mexico, along with an additional 10% tariff on Chinese imports, came into force on Tuesday. Additionally, President Trump confirmed in his State of the Union address that reciprocal tariffs will take effect on April 2.

In Switzerland, annual Consumer Price Index (CPI) inflation rose by 0.3% in February, following a 0.4% increase in January, according to data from the Swiss Federal Statistical Office. This figure slightly exceeded market expectations of a 0.2% rise.

On a monthly basis, CPI rose by 0.6%, rebounding from a 0.1% decline in the previous month. This was the first monthly increase since May 2024 and came in above the consensus forecast of 0.5%. Bullish Bounce in USDCHF as Oversold Conditions Take Hold_1

Bullish Bounce in USDCHF as Oversold Conditions Take Hold_1

Technical Analysis

USDCHF has reached the lower boundary of a descending channel, where price action has responded with an initial bullish reaction. This could lead to a more extended upside retracement, as the 4-hour chart’s Relative Strength Index (RSI) has dipped into oversold territory, reaching a low of 23. If this level holds as support, a potential rebound toward the 0.9000 area may unfold.

The 100-day and 200-day moving averages are positioned at 0.9003 and 0.9039, respectively, aligning with key support-turned-resistance zones. While the broader trend remains bearish, a corrective move to the upside appears increasingly likely.

However, if USDCHF fails to sustain this rebound and breaks below the 0.8850 level, further downside pressure could accelerate in the short term.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8906

Target price: 0.9000

Stop loss: 0.8850

Validity: Mar 14, 2025 15:00:00

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Bullish Bounce in USDCHF as Oversold Conditions Take Hold

Technical Analysis

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