USD/CHF Rebounds from Yearly Lows

The USD/CHF pair tested its yearly low slightly below 0.84100 yesterday but has since recovered to just above 0.84800 today.

The bullish sentiment was supported by positive news about the U.S. economy—data released yesterday showed GDP growth for the second quarter at 3.0%, surpassing the expected 2.8%.

Bulls may find further encouragement from events earlier this year when the head of the Swiss National Bank (SNB) warned that an excessively strong franc could pressure the country's economy. Following this, USD/CHF rose by more than 8% over four months.

Technical analysis of the USD/CHF chart indicates that since June, the price has been forming a downward channel (shown in red). However, several factors may support a bullish reversal:

→ The price is near the lower boundary of a larger channel that began in 2022, which could act as support.

→ The RSI on the 4-hour chart not only shows a bullish divergence but also spiked above the 50 level after hovering near the lower boundary since 20 August.

→ Comparing the downward impulses A→B and C→D reveals that the first drop was more aggressive, while the second showed a less steep decline—signalling weakening selling pressure. There's also another bullish divergence between the lows at B and D.

Given these factors, there's reason to believe that the median line of the current red downward channel is at risk of a bullish breakout, potentially paving the way for USD/CHF to move towards the upper boundary of the channel.

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