Sellers Remain in Charge in USD/CHF But That Might Change Soon
USD/CHF is finding support at the 50 SMA after the retreat yesterday and is likely to bounce if the FED leaves the policy open for more data
USD/CHF has been bearish since November last year, losing around 16 cents from top to bottom although the USD gained some momentum since early last week and this pair climbed around 1.5 cents higher until yesterday, when it encountered significant resistance around the important level of 0.8700. This pair found it difficult to extend its recovery, primarily due to investors’ cautiousness ahead of the upcoming interest rate decision by the Federal Reserve (Fed), which is scheduled to be announced later this evening.
Last week USD/CHF reached its lowest level in more than eight years although after this significant decline, the price has bounced back. This suggests that the USD/CHF exchange rate has remained at a relatively low level without experiencing a recovery during the current week.
The FED Chair, Jerome Powell, is widely expected to raise interest rates further to 5.50% as core inflation remains high, although it has been declining together with the headline CPI. So, the rate hike today is not the main event; the main event will be the commentary from Jerome Powell on future policy. So, traders will closely monitor the guidance provided by the FED regarding future interest rate changes to assess whether rates have reached their peak or if there’s room for further increases.
Despite making progress as inflation slows inflation, the policymakers have maintained a hawkish tone in their recent statements and communications. This suggests that they are taking a cautious approach and are unlikely to declare victory over inflation at this point in time. The most likely stance from the FED will the that they will likely continue monitoring the economic conditions and inflationary pressures before making any further decisions. This would be bullish for the USD and for USD/CHF . The 50 SMA (yellow) is acting as support on the H4 chart, while the stochastic indicator is already oversold, so a bounce from here is very highly probable.
USD/CHF Live Chart
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