Published on Jun 16, 2023

Daily Analysis For USD/CHF 16-06-2023

USD/CHF Analysis

Key Points: -

· The USD/CHF pair is currently consolidating after experiencing a significant decline, reaching a level not seen in over a month.

· The US Dollar remains weak, hovering near a five-week low, which poses a challenge for the pair.

· The Swiss Franc (CHF) is undermined by the prevailing positive sentiment in the market, providing some support to the USD/CHF pair.

Today's Scenario: -

Throughout the Asian session on Friday, the USD/CHF pair trades within a narrow range, showing consolidation after experiencing significant losses over the past three days. The pair manages to defend and hold above the 0.8900 level, which represents a one-month low reached the previous day. However, a substantial recovery remains elusive.

The US Dollar (USD) struggles to attract buyers and remains near a five-week low, acting as a significant headwind for the USD/CHF pair. Despite the Federal Reserve's (Fed) hawkish stance, investors believe that the central bank is nearing the end of its rate-hiking cycle, as evidenced by the recent decline in US Treasury bond yields and the post-European Central Bank (ECB) surge in the shared currency. These factors keep the USD depressed and continue to hinder the USD/CHF pair.

It is important to note that the Fed recently decided to leave interest rates unchanged after a two-day policy meeting, while signaling the potential for a 50 basis points increase by the end of the year. The "dot plot" released by the Fed indicates that officials now project rates peaking at 5.6% this year, higher than the previous projection of 5.1% in March. Additionally, the Fed expects slightly stronger economic growth, with forecasts of a 1% expansion this year (up from the 0.4% projected in May), followed by 1.1% in 2024 and 1.8% in 2025.

These factors contribute to traders refraining from initiating fresh bearish positions on the USD. Moreover, the overall positive sentiment in the equity markets weakens the safe-haven appeal of the Swiss Franc (CHF) and helps limit the downside for the USD/CHF pair, at least temporarily. Nonetheless, a significant recovery remains elusive, and cautiousness is advised for aggressive bullish traders, especially in the absence of relevant economic releases from the US. Despite this consolidation, the USD/CHF pair is on track to end the week with notable losses for the second consecutive week.

Diagram of USD/CHF: -

Economic Events : -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

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

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

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

If USD/CHF buyers gain momentum, their initial target could be the 50-day moving average (DMA) acting as a support-turned-resistance around 0.8985. A successful break above this level might lead to a test of the psychological level at 0.9000.

However, before the USD/CHF bulls can celebrate, they will encounter the lower boundary of a rising trend channel that has been in place for six weeks, approximately near 0.9015, which may serve as a final test before a potential upward move. Till we do not advise to buy USD/CHF.

Sell Scenario: -

The CHF experienced its largest drop in a week, breaching key technical supports and encouraging bears to push the pair to multi-day lows. The bearish MACD signals also contribute to the sellers' confidence in the USD/CHF pair.

It is noteworthy that the RSI (14) line remains below 50.0, indicating a potential bottoming out and posing a challenge for USD/CHF bears in recent times.

Nevertheless, there are no immediate barriers ahead of the pair before it reaches a horizontal support zone established two months ago, around 0.8865-60.

Subsequently, the yearly low of approximately 0.8820 may act as an additional obstacle for further downward movement, while the 61.8% Fibonacci Expansion (FE) of the March-May price swings, near 0.8765, could entice more selling pressure. Till we do not advise to sell USD/CHF.