. Hawkish Fed Comments Drive USD/CHF Above 0.8900

Hawkish Fed Comments Drive USD/CHF Above 0.8900

17 Jun 2024

USD/CHF climbs above 0.8900 as hawkish Fed comments strengthen the US Dollar

FUNDAMENTAL OVERVIEW:

  • USD/CHF trades stronger near 0.8910 in Monday’s early European session.
  • Fed’s Kashkari stated it’s reasonable for the central bank to wait until December for more data before cutting rates.
  • The Swiss National Bank is expected to maintain its interest rate at 1.5% due to persistent inflation in Switzerland.

The USD/CHF pair breaks a three-day losing streak, trading around 0.8910 during Monday’s early European session. The firmer US Dollar, bolstered by the Federal Reserve’s hawkish stance and projection for only one rate cut in 2024, supports the pair. Switzerland’s SECO Economic Forecasts are due later today, with the Swiss National Bank’s interest rate decision anticipated on Thursday.

Federal Reserve officials now forecast only one quarter-point rate cut by the end of this year, down from the three previously projected. Fed Chair Jerome Powell noted last week that inflation might end the year higher than initially anticipated, suggesting that the Fed might maintain higher rates for longer to curb inflation. Powell emphasized that the US central bank lacks the confidence to cut rates without more convincing evidence that inflation is moving towards their goals.

Minneapolis Fed President Neel Kashkari stated on Sunday that it’s a “reasonable prediction” for the Fed to wait until December for more data before cutting interest rates. Meanwhile, Cleveland Fed President Loretta Mester remarked on Friday that achieving the Fed’s 2.0% inflation target might take longer than initially anticipated.

On the Swiss front, the Swiss National Bank is expected to maintain its interest rate at 1.5% during its June meeting on Thursday, as inflation in Switzerland reached its highest level since December 2023. Additionally, ongoing geopolitical tensions in the Middle East and political uncertainty in the Eurozone, particularly in France, could increase safe-haven flows, benefiting the Swiss Franc (CHF) against the USD. Following a loss to the right-wing National Rally in the European vote, France’s President Emmanuel Macron called for early parliamentary elections. Macron remarked on Sunday that the economic programs proposed by the two extremist blocs in the parliamentary election are unrealistic and that France faces a very serious moment with significant economic issues at stake.

USD/CHF TECHNICAL ANALYSIS DAILY CHART:

Technical Overview:

USD/CHF is trading within a down channel.

USD/CHF is moving below all the Moving Averages (SMA).

The Relative Strength Index (RSI) is in a Neutral zone, while the Stochastic oscillator suggests a Negative trend.

Immediate Resistance level: 0.8946

Immediate support level: 0.8899

HOW TO TRADE USD/CHF

USD/CHF surged initially but faced resistance, leading to a subsequent decline. Despite another attempt to rise, the pair quickly retreated, pushing prices lower. Currently, USD/CHF is hovering near a crucial support level, and a breach of this zone could signal further downside potential.

TRADE SUGGESTION- STOP SELL– 0.8892, TAKE PROFIT AT- 0.8828, SL AT- 0.8946.