USD/CHF Analysis

Key Points: -

·       The USD/CHF pair is facing challenges in building upon its significant gains achieved in the last two days.

·       Uncertainty surrounding the possibility of a rate hike by the Federal Reserve is keeping USD bulls cautious and limiting further upside potential.

·       Additionally, traders appear hesitant to make aggressive moves as they await the release of the important US Consumer Price Index (CPI) report.

Today's Scenario: -

During the Asian session on Tuesday, the USD/CHF pair is trading within a narrow range below the 0.9100 level, consolidating the strong gains it achieved in the past two days.

The USD is facing pressure as expectations grow that the Federal Reserve (Fed) will likely refrain from raising interest rates this month. This is acting as a hindrance for the USD/CHF pair. Several influential Fed officials have recently reiterated market expectations of a pause in the central bank's year-long tightening cycle.

However, futures on Fed funds indicate the possibility of a 25 basis points rate increase at the July FOMC meeting. This is driven by surprise rate hikes by other major central banks, such as the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC), which suggest that the fight against inflation is not yet over. This limits the downside for the USD and provides support for the USD/CHF pair.

Traders are showing caution and refraining from making aggressive moves, choosing to wait for the release of the latest US consumer inflation figures, which are scheduled for later in the early North American session. The US CPI report will have an impact on the Fed's policy outlook and drive USD demand, potentially providing significant impetus to the USD/CHF pair ahead of the FOMC policy decision on Wednesday.

Meanwhile, the generally positive sentiment in equity markets may weaken the safe-haven Swiss Franc (CHF) and offer some support to the USD/CHF pair. However, a slight decrease in US Treasury bond yields could deter traders from positioning for a substantial USD recovery. As a result, the USD/CHF pair is more likely to continue exhibiting subdued or range-bound price action on Tuesday.

Diagram of USD/CHF: -

Economic Events : -

Date    Event                                                                                                                Impact    Currency

4:15     (New Zealand) Visitor Arrivals YoY                                                        Low      NZD

5:20     (Japan) BSI Large Manufacturing QoQ                                                Low      JPY

6:00     (Australia) Westpac Consumer Confidence Change                       High     AUD

6:00     (Australia) Westpac Consumer Confidence Index                           High     AUD

7:00     (Australia) NAB Business Confidence                                                 High     AUD

11:30   (Germany) Harmonised Inflation Rate MoM                                        Low      EUR

11:30   (Germany) Harmonised Inflation Rate YoY                                           Low      EUR

11:30   (Germany) Inflation Rate MoM                                                         Medium      EUR

11:30   (Germany) Inflation Rate YoY                                                            Medium      EUR

11:30   (Germany) CPI                                                                                             High      EUR

11:30   (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr)              Low      GBP

11:30   (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr)       Medium      GBP

11:30   (United Kingdom) Unemployment Rate                                               High      GBP

11:30   (United Kingdom) Claimant Count Change                                         High      GBP

11:30   (United Kingdom) Employment Change                                               High      GBP

11:30   (United Kingdom) HMRC Payrolls Change                                           Low      GBP

12:30   (Lithuania) Current Account                                                                    Low      EUR

12:30   (Spain) CPI                                                                                                  High      EUR

12:30   (Spain) Core Inflation Rate YoY                                                              Low       EUR

12:30   (Spain) Harmonised Inflation Rate MoM                                             Low       EUR

12:30   (Spain) Harmonised Inflation Rate YoY                                                Low       EUR

12:30   (Spain) Inflation Rate MoM                                                                     Low       EUR

12:30   (Spain) Inflation Rate YoY                                                                        Low       EUR

13:30   (China) Total Social Financing                                                               Low       CNY

13:30   (China) New Yuan Loans                                                                          Low       CNY

13:30   (China) M2 Money Supply YoY                                                               Low       CNY

13:30   (China) Outstanding Loan Growth YoY                                                Low       CNY

14:10   (Spain) 3-Month Letras Auction                                                             Low       EUR

14:30   (Euro Area) ZEW Economic Sentiment Index                            Medium        EUR

14:30   (Germany) ZEW Economic Sentiment Index                                    High        EUR

14:30   (Germany) ZEW Current Conditions                                                    Low        EUR

14:30   (United Kingdom) 10-Year Treasury Gilt Auction                             Low        GBP

14:40   (Italy) 3-Year BTP Auction                                                                     Low         EUR

14:40   (Italy) 7-Year BTP Auction                                                                     Low         EUR

14:40   (Italy) 30-Year BTP Auction                                                                  Low         EUR

15:00   (Germany) 5-Year Bobl Auction                                                          Low          EUR

15:15   (Euro Area) ECB Enria Speech                                                            Low          EUR

15:30   (Latvia) Current Account                                                                      Low         EUR

15:30   (United States) NFIB Business Optimism Index                            Low          USD

17:30   (Ecuador) Balance of Trade                                                                 Low          USD

18:00   (United States) Core Inflation Rate MoM                                 Medium          USD

18:00   (United States) Inflation Rate MoM                                                 High          USD

18:00   (United States) Core Inflation Rate YoY                                          High          USD

18:00   (United States) Inflation Rate YoY                                                    High          USD

18:00   (United States) CPI                                                                               High          USD

18:00   (United States) CPI s.a                                                                        High          USD

18:15   (Germany) Current Account                                                                Low          EUR

18:25   (United States) Redbook YoY                                                             Low          USD

19:30   (United Kingdom) BoE Gov Bailey Speech                              Medium         GBP

20:30   (United Kingdom) BoE Dhingra Speech                                         Low          GBP

21:00   (United States) 52-Week Bill Auction                                              Low          USD

22:30   (United States) 30-Year Bond Auction                                            Low          USD

Buy Scenario: -

A recovery in the USD/CHF pair, it would need to trade successfully above the 200-HMA level, currently at 0.9065. Additionally, the 61.8% Fibonacci retracement level of the pair's downtrend from May 31 to June 09, near 0.9085, acts as a short-term upside hurdle.

Above all, the USD/CHF bulls would face crucial resistance around the double top formation near 0.9110 in their quest to regain control. Till we do not advise to buy USD/CHF.

Sell Scenario: - The bearish signals from the MACD and the reversal of the RSI (14) from the overbought territory contribute to the downside bias. However, the RSI line currently sits below the 50.0 level, suggesting limited room for further downside in the USD/CHF pair.

Attention is drawn to the convergence of the 50-HMA and an ascending trend line from last Friday, around 0.9045, which serves as key support.

If the bears manage to break this strong support, a quick decline towards the psychological level of 0.9000 cannot be ruled out. Subsequently, the pair's sellers may face resistance at the monthly low of 0.8985 and the previous monthly low of 0.8820. Till we do not advise to sell USD/CHF.

Support and Resistance Level: -

 Support              Resistance  

 S1 0.9034   -     R1 0.9128

 S2 0.8978  -      R2 0.9165

 S3 0.8941  -      R3 0.9221