- USD/CHF starts the new week on a weaker note, although it lacks follow-through selling.
- A modest pullback of the US dollar from a multi-month high puts pressure on the pair.
- Dovish Fed expectations and elevated US bond yields limit losses for the USD and the pair.
The USD/CHF pair opens with a bearish gap on the first day of a new week, although it manages to stay above the 0.8900 level at the beginning of the European session. The pair is moving around the 0.8910-0.8915 zone, down almost 0.20% on the day, and remains at the mercy of the US Dollar (USD) price dynamics.
After the sharp rise in recent days, the DXY Dollar Index, which measures the strength of the Dollar against a basket of currencies, retreats from six-month highs and turns out to be a key factor that puts some pressure on the USD/CHF pair . The fall of the Dollar could be attributed to a strong rebound in demand for the Japanese Yen (JPY), driven by statements by Bank of Japan (BoJ) Governor Kazuo Ueda over the weekend. However, the hawkish expectations of the Federal Reserve (Fed) could curb the bearish expectations of the Dollar.
Market participants appear convinced that the US central bank will keep interest rates higher for longer and have been pricing in the possibility of a further 25 basis point hike later this year. These expectations were reinforced by a report in The Wall Street Journal, which stated that some officials still prefer to err on the side of raising rates too much, reasoning that they can cut them later. This remains support for elevated US Treasury yields and should act as a tailwind for the Dollar, warranting caution before positioning for a deeper corrective decline in USD/CHF.
Investors would also prefer to stay on the sidelines ahead of this week’s key US macroeconomic releases: the latest consumer inflation figures on Wednesday, followed by the Producer Price Index (PPI) and retail sales data on Thursday . Meanwhile, the overall positive tone of the stock markets could weigh on the safe-haven Swiss franc (CHF) and help limit the USD/CHF pair’s losses. Therefore, it will be prudent to wait for heavy selling before confirming that the pair has topped out near the 0.8940-0.8945 area.
USD/CHF technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
