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- The USD/CHF had a 0.40% loss, declining towards the 0.8400 level.
- Markets are anticipating a significant 160 basis points of easing by the Fed in 2024.
- It has marked a 9% depreciation and a third consecutive weekly loss for the year’s end.
Friday’s trading session saw the USD/CHF pair facing losses as it declined to 0.8405. This is attributed to dovish bets on the Federal Reserve (Fed) and the impact of lower US yields, which weighed heavily on the pair’s dynamics.
The Federal Reserve recognized a deceleration in inflation and a cooling of economic activity at their last 2023 meeting. The absence of interest rate increases in 2024 is now endorsed, forecasting a 75 bps reduction as per the median terminal rate of the Dot Plot from the Summary of Economic Proyections. Market expectations now account for rate cuts in both March and May, and some traders are placing bets for a cut as soon as the upcoming meeting in January. This overconfidence is weakening the US dollar.
US Treasury yields are mixed, with some rates up and others down while remaining near multi-month lows. Yields descending, reflecting the dovish expectations, results in a concurrent disadvantage for the USD, pushing down the USD/CHF.
The upcoming week poses labor market figures, such as December’s Nonfarm Payrolls, Wage Inflation, and Unemployment Rate, closely monitored by the Fed.
USD/CHF levels to watch
The daily chart’s technical indicators show that selling pressure is currently dominating, with the pair positioned under the critical levels of the 20, 100, and 200-day Simple Moving Averages (SMAs), underscoring the dominance of sellers.
The Relative Strength Index (RSI) reading conveys an oversold market condition, hinting at a potential reversal, while the presence of rising red bars in the Moving Average Convergence Divergence (MACD) signals that bearish momentum continues to ascend.
In the short term, the rising bearish momentum evident from the MACD could temper a bullish reversal despite the RSI suggesting an oversold market scenario. Consequently, the aggressive selling pressure continues to dominate the short-term technical outlook of the market.
Support Levels: 0.8400, 0.8350, 0.8330.
Resistance Levels: 0.8500, 0.8530, 0.8600.
USD/CHF daily chart
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