USDCHF Weakens in Choppy Markets, Investors Anticipate Dollar’s Rise

Today, the USDCHF improves slightly but remains in the 0.9108/9201 range. For the time being, intraday bias stays up. A break of 0.9108 on the downside will first target 0.9017 support. If there is another break there, the decline from 0.9471 to the low of 0.8925 will most likely resume. Breaking above 0.9200 resistance on the upside should resume the rally from 0.8925 to 0.927.

However, a lackluster US dollar demand failed to excite bullish traders, putting a cap on any additional advances for the USDCHF pair for the time being. Fed Chair Jerome Powell played down market expectations for an earlier than expected rate hike during his highly anticipated speech at the Jackson Hole Symposium.

Powell seemed more positive about employment and inflation progress, and he reiterated that QE withdrawal will begin later this year. Powell, on the other hand, warned of the dangers of the delta variant’s rapid expansion. He also tried to separate tapering from rate hikes, assuring that the Fed was not in a rush to boost rates.

The Fed’s lift-off was repriced, as seen by the continued decrease in US Treasury bond yields. The yield on the benchmark 10-year US government bond has returned to a level near 1.30 percent. As a result, this was considered as a crucial factor that continued to weigh on the greenback, limiting the USDCHF pair’s upside potential.

USDCHF Rebounds From Multi-Week Lows Goes Above Mid-0.9100s

In August, the Swiss KOF Economic Barometer fell for the third month in a row to 113.5, missing expectations of 126.3. It is, however, still significantly higher than the average figure of 100. “The fourth wave of the epidemic, which is now becoming increasingly clear,” according to KOF, “seems to be fueling questions about mainly unrestricted economic activity shortly.”

During the early European session, the USD/CHF pair surged to new daily highs, around 0.9145-50, recovering over 50 pips from over three-week lows hit earlier this Monday. On the first day of a new trading week, the pair halted its downward drop from the 0.9200 round figure and attracted some dip-buying near the 0.9100 marks. The widespread optimistic feeling in financial markets weakened traditional safe-haven currencies, such as the Swiss franc, and gave the USDCHF pair a boost.

In the wider picture, the inability to hold beneath the level at 0.9176 keeps USDCHF negative in the medium term. If the 0.8925 support level is broken, the entire drop from 1.0342 (2016 high) to 0.8756 (low) will restart. A break of the 0.9273 resistance level and persistent trading above the 0.9176, on the other hand, will signal a bullish trend reversal. For confirmation, the focus will go to the 0.9471 resistance level.