Usman Salis
USD/CHF retreats sharply from the 0.8700 resistance level as the US Dollar faces investor caution amid critical economic data releases this week.
USD/CHF Retreats from 0.8700 Resistance Level
After reaching a two-month high of 0.8700, USD/CHF reversed course during Monday’s European session. The pair’s pullback follows a dip in the US Dollar Index (DXY), which recently hit 104.60, marking its highest level in nearly three months. This retracement suggests investors’ hesitation as they await key US economic reports this week.
Investors are closely monitoring the upcoming Q3 GDP, September’s PCE Price Index, and October’s Nonfarm Payrolls (NFP) data. These reports could shape Federal Reserve rate expectations, as they may indicate whether the Fed will maintain its hawkish stance. Markets have already priced in a potential 25 basis points rate cut in November; however, strong economic and job data could delay dovish expectations until December.
SNB’s Interest Rate Strategy and Swiss Inflation Impact on USD/CHF
On the Swiss side, the Swiss National Bank (SNB) is expected to keep reducing interest rates given its relatively contained inflation rate, which hovers near 2%. With inflation pressures subdued, there may be less incentive for SNB to aggressively hike rates, further influencing the dynamics of the USD/CHF pair.
The USD/CHF pair has formed a Bullish Flag on the daily chart, a pattern suggesting a possible continuation in the uptrend. The 20-day Exponential Moving Average (EMA) trending upwards near 0.8613 reinforces a bullish outlook, with the 14-period Relative Strength Index (RSI) positioned within a bullish range of 60.00-80.00, indicating upward momentum.
Conclusion
A break above the recent high of 0.8700 could open the way for USD/CHF to test levels seen on August 15 at 0.8750, and potentially the July 25 low of 0.8777. On the downside, a drop below the September 12 low of 0.8550 could lead to further declines, targeting support at 0.8500 and the October 2 low of 0.8450.
Usman Salis
