The USD/CHF pair trades lower near 0.9160 during Tuesday’s early European session, breaking a five-day winning streak. The move reflects a retreat in US Dollar strength and increased demand for the safe-haven Swiss Franc due to lingering geopolitical concerns.
Factors Influencing USD/CHF:
US Dollar Weakness:
DXY Retreat: The US Dollar Index pulls back from a multi-month high of 110.17, settling near 109.55. This correction has weighed on USD/CHF.
Fed Rate Expectations: Market pricing reflects a cautious stance on US Federal Reserve rate cuts, limiting the downside for the USD. Expectations for only one rate cut by year-end, down from two earlier, support the Greenback’s relative strength.
Geopolitical Risks and CHF Safe-Haven Demand:
Middle East Tensions: Developments surrounding the ceasefire negotiations between Hamas and Israel could influence the demand for safe-haven assets. Signs of escalation would likely favor the Swiss Franc.
Key Data to Watch:
US December PPI: Scheduled for later today, this release will offer clues about producer-level inflation trends.
US CPI on Wednesday: A significant inflation print could shift Fed policy expectations and impact USD/CHF.
Fed Officials’ Speeches: Scheduled remarks could provide additional clarity on the Fed’s policy direction.
Technical Outlook:
Support Levels:
0.9145: Immediate support near recent lows.
0.9100: A psychological barrier and key support zone.
0.9050: A deeper level of support signaling a broader correction.
Resistance Levels:
0.9200: Immediate resistance limiting recovery attempts.
0.9250: A critical hurdle aligned with recent highs.
0.9300: Key level to watch for confirming bullish momentum.
Momentum Indicators:
- The pair remains above its 50-day EMA, suggesting medium-term bullish momentum despite the current pullback.
- RSI is trending lower but remains neutral, indicating room for either side to gain control.
Conclusion:
The USD/CHF pair faces near-term downside risks amid US Dollar correction and geopolitical tensions supporting the CHF. However, sustained expectations of cautious Fed rate cuts could limit losses. Key data releases, including the US PPI and CPI, will likely set the tone for USD/CHF’s next directional move. Investors should remain vigilant about evolving geopolitical developments and market sentiment.
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