. USD/CHF Stays Near 0.9100 on Positive Market Sentiment

USD/CHF Stays Near 0.9100 on Positive Market Sentiment

USD/CHF Stays Near 0.9100 on Positive Market Sentiment

20 May 2024

The USD/CHF maintains near 0.9100 levels amid positive market sentiment.

FUNDAMENTAL OVERVIEW:

  • The USD/CHF strengthens as the US Dollar rebounds from its earlier losses, supported by improved US Treasury yields.
  • Weaker US inflation and employment figures have spurred speculation about potential Fed rate cuts in 2024.
  • Meanwhile, the slight uptick in the 10-year Swiss yield suggests expectations that the Swiss National Bank will likely keep its current interest rates unchanged.

For the third consecutive day, the USD/CHF maintains its upward momentum, hovering around 0.9100 in early European trading on Monday. The strengthening of the USD largely contributes to the uptrend of the USD/CHF pair. Notably, Swiss markets are closed today due to the Whit Monday bank holiday.

Yet, the softening of US consumer inflation and labour market indicators has sparked conjecture regarding potential Federal Reserve (Fed) rate reductions in 2024. The CME Fed Watch Tool indicates a slight uptick to 49.0% in the likelihood of a 25 basis-point rate cut in September, compared to 48.6% a week ago. Such prospective monetary policy easing could weaken the US Dollar, constraining the ascent of the USD/CHF pair.

Fed officials remained cautious about interest rates, highlighting that a singular drop in inflation isn’t enough to ensure a sustainable return to the targeted 2% rate. Investors anticipate the release of the Federal Open Market Committee (FOMC) minutes on Wednesday, expecting policymakers to emphasize the importance of maintaining higher interest rates for an extended period.

On the Swiss front, the yield on the 10-year Swiss government bond saw a slight uptick to approximately 0.7%. Such a rise in Swiss yield often suggests that the Swiss National Bank (SNB) may opt to keep its current interest rates unchanged, potentially bolstering the CHF. In an unexpected move in March, the SNB reduced its key interest rate by 25 basis points to 1.50%, marking its first rate cut in nine years and making it the initial major central bank to implement monetary policy easing.

To gain additional insights into the Swiss economy, traders are anticipated to monitor the Employment Level data, set to be disclosed by Swiss Statistics later this week. Furthermore, Swiss National Bank (SNB) Chairman Thomas Jordan is scheduled to address topics including communication, monetary policy, and public impact at the Swiss Media Forum in Lucerne, Switzerland, on Friday.

USD/CHF TECHNICAL ANALYSIS DAILY CHART:

Technical Overview:

USD/CHF is currently trading within an up channel.

USD/CHF is positioned above all the Moving Averages (SMA).

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

Immediate Resistance level: 0.9096

Immediate support level: 0.9064

HOW TO TRADE USD/CHF

USD/CHF encountered resistance following a sharp upward movement and reversed lower. Currently, it is trading within a range near a significant resistance level. If this zone is breached, further upside potential may emerge.

TRADE SUGGESTION- STOP BUY – 0.9105, TAKE PROFIT AT- 0.9170, SL AT- 0.9065.