The Swiss Franc (CHF) weakens against a strengthening US Dollar (USD) on Tuesday, at the start of the new year. The main reason seems to be higher US Treasury yields, with the 5, 10 and 30-year maturity Bond yields, all up by over 2% at the time of writing. The advances seem to suggest bond holders don’t share the widely held view that interest rates are likely to fall as sharply as some expect in 2024. Higher interest rates mean a stronger Dollar by attracting greater inflows of foreign capital.

Negative press surrounding the Swiss Franc on Tuesday could be denting CHF demand after the news BNP Paribas is to compensate mortgage holders to whom it sold Swiss Franc loans prior to the 2015 devaluation, when CHF dropped its peg with the Euro. USD/CHF – the number of Swiss Francs that one US Dollar can buy – continues declining and has reached a new over-one-decade low. The pair is now arguably in a downtrend on all major time frames, suggesting bears are fully in control. USD/CHF has broken below the last key chart line at the July 2023 lows of 0.8552 and there is little in the way of key support below.

On the weekly chart, the Relative Strength Index (RSI) is showing slight bullish convergence at the December 2023 lows, however, compared to the July 2023 lows. This suggests the current downtrend may be losing momentum. The convergence occurs because – despite price falling to a new low in December, RSI did not follow suit when compared with July. During the last week of December the RSI also fell into oversold territory (below 30). If it remains oversold it will be a signal for short-traders not to add to their short positions. If there is a recovery this week and the RSI rises back above 30 it will give a signal to close short positions and buy longs. This suggests a risk of a correction higher on the horizon. Nevertheless, the dominant trend remains bearish, suggesting the bias is eventually for lower prices. A break below last week’s 0.8335 low would re-confirm the downtrend and lead to further weakness, probably to 0.8300, and then below that to other round-number levels.