In the European session on Tuesday, the USD/CHF pair has seen a modest climb above 0.8850, with investors adopting a cautious stance in anticipation of Federal Reserve Chair Jerome Powell’s testimony before Congress on Wednesday and the release of United States Nonfarm Payrolls (NFP) data later in the week.
The Swiss Franc continues to strengthen against the US Dollar as the US Dollar Index (DXY) rebounds from a two-day low around 103.70. The market is keenly awaiting Powell’s remarks and insights into the timing of potential interest rate adjustments based on the February labor market data.
Despite the Swiss Franc receiving a boost from a higher-than-expected annual Consumer Price Index (CPI) in February, the USD/CHF pair has not witnessed significant buying interest. While the monthly CPI rose by a robust 0.6%, exceeding January’s 0.2%, the annual CPI at 1.2% surpassed expectations of 1.1% but fell slightly from the prior reading of 1.3%.
In other developments, it has been announced that the Swiss National Bank (SNB) is in search of a successor for Chairman Thomas J. Jordan, with the new chairman set to be revealed in the second half of the year.
The USD/CHF pair experiences a mild pullback while attempting to break out of the consolidation range between 0.8744 and 0.8898 on a four-hour timeframe. This suggests that while a reversal is not imminent, US Dollar bulls may need additional strength for a decisive break. The consolidation pattern indicates a contraction in volatility, with a potential breakout expected to result in increased volatility, wider price swings, and higher trading volume.
Supporting the US Dollar bulls, the 50-period Exponential Moving Average (EMA) near 0.8822 remains intact.
The 14-period Relative Strength Index (RSI) climbs above 60.00, indicating potential bullish momentum if it sustains at these levels.
A bullish scenario could unfold if the pair breaks above the three-month high at 0.8900, leading to further gains towards the lows of September 20 and November 8 at 0.8932 and 0.8976, respectively.
Conversely, a breakdown below the February 13 low at 0.8746 could expose the pair to the round-level support of 0.8700, followed by the February 1 high around 0.8650. Traders are advised to monitor key levels for potential directional cues in the USD/CHF pair.
