English
USD/CHF Defends 0.8600 And Holds Above Multi-Year Low, But Is Not Yet Out Of The Doldrums
On Monday, USD/CHF sees some purchasing on dips and is supported by a modest USD increase. Bets that the Federal Reserve will shortly end its rate-hiking cycle should keep the dollar and the pair in check. A milder risk tone could be advantageous for the safe-haven CHF and contribute further to capping the major.
The USD/CHF pair recovers approximately 35 pips from levels below 0.8600, but lacks follow-through and remains within striking distance of its lowest level since January 2015, set on Friday. Spot prices trade in the vicinity of 0.8615 during Monday's Asian session, remaining nearly unchanged and consolidating the recent decline in the aftermath of extremely oversold conditions on the daily chart.
The upbeat University of Michigan (UoM) Consumer Confidence Index released on Friday provides some support for the US Dollar (USD) and operates as a tailwind for the USD/CHF pair. In fact, according to the preliminary report, the index surpassed even the most optimistic projections and surged to 72.6 in July, the highest level since September 2021. In addition, inflation expectations for the coming year inched up to 3.4% from 3.3% in June, although they remain below April 2022's peak of 5.4%. In light of growing expectations that the Federal Reserve (Fed) will shortly end its policy tightening cycle, any meaningful USD recovery from its lowest level since April 2022 appears unlikely.
After the widely anticipated 25 basis point increase in July, market participants now appear persuaded that the U.S. central bank will maintain current interest rates. Data indicating a further moderation in US consumer prices and the fact that the US PPI recorded its smallest annual increase in nearly three years in June confirmed the predictions. This, along with indications that the US labour market is cooling, should allow the Fed to soften its hawkish stance, preventing USD bulls from placing aggressive bullish bets and keeping the USD/CHF pair contained, at least for the time being.
In addition, a modest decline in US equity futures could benefit the safe-haven Swiss Franc (CHF) and further contribute to limiting spot price gains. In light of this, it is prudent to wait for significant follow-through buying before confirming that the recent steep decline observed over the past week or so has run its course and positioning for any meaningful upside. In the near future, the US Empire State Manufacturing Index could impact USD price dynamics and provide some impetus for the USD/CHF pair later in the early North American session.
Bonus rebate to help investors grow in the trading world!
