When it comes to events that trigger market volatility, investment often rushes into safe-haven assets. Swiss franc is one of the favorites at all such times. However, the currency has been experiencing a hard time against the greenback due to investors’ fears over negative effects that Brexit could create for the Swiss economy due to the strong correlation between Switzerland and the 28-nation bloc.

Surrounded by members of the Eurozone, Switzerland has formed close political and economic ties with the EU through a free trade agreement which was signed in 1972, and more than 100 bilateral agreements which has not only turned the EU into Switzerland’s biggest trading partner but also allows the free movement of Swiss citizens/professionals within the EU.

Against the background of uncertainty on the future of Europe, the Swiss franc is about to close lower for the third consecutive trading day even after the markets have digested the shock-waves from Britain’s vote to leave the EU.

After witnessing a sharp advance for the last several days, the dollar index DXY is losing steam. The weakness in the greenback is partly due to weak data on economic growth reported lately. Data from the Census Bureau showed that total orders for durable goods in the US fell by 2.2% in May, well below the expectation of a 0.5% decline. After eliminating transportation, core durable goods orders posted a drop of 0.3% in the reported month, compared with the month before.

On June 28, the Bureau of Economic Analysis will publish the US Gross Domestic Product for the first quarter in 2016. The forecast is for an increase of 1% in comparison with the preceding period.

Fig. USDCHF D1 Technical Chart

The USD is on track to surge higher against the swissie after failing to break through the level 0 of Fibonacci retracement. The pair currently is lingering near the 23.6% level of Fibonacci, with the %K line (blue line) approaching the overbought threshold as shown on the stochastics chart, indicating that bulls are dominating the market. The pair is expected to hit the 38.5% Fibonacci mark, thereafter resuming its down-move. Longs are encouraged in the short term.

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