Synopsis:

BofA’s quant model highlights a bullish outlook for USD/CHF, forecasting a move to 0.8865. While USD rallies against other G10 currencies appear overstretched, the pair's uptrend against CHF remains relatively unexhausted.

Key Points:

• USD Rally Context:

  • The USD has rallied significantly post-election, with a 3% increase since the event and nearly 6% since late September, marking a 99th percentile move over the past decade.
  • The initial USD strength was concentrated in EUR/USD due to renewed US tariff risks disproportionately impacting the Eurozone.

• Shift in USD Strength:

  • As the US equity rally cooled, USD strength became more pronounced against cyclical, high-beta G10 currencies, including CHF.

• Quant Model Signals for USD/CHF:

  • Despite the broader USD rally appearing stretched, USD/CHF's uptrend remains intact, with Moving Average Acceleration (MAA) indicators still below the critical 80 threshold.
  • This technical dynamic supports further upside for USD/CHF in the near term.

• Lack of Near-Term Global Catalysts:

  • BofA notes limited global catalysts over the next 1-2 weeks to justify fading the USD rally, reinforcing the bullish case for USD/CHF.

Conclusion:
While USD rallies have broadly extended, BofA’s quant model suggests further upside potential for USD/CHF, targeting 0.8865. The pair's technical resilience and the absence of strong counter-catalysts make it a standout among USD/G10 opportunities in the near term.