USD/CHF Bears Eye Key Support Amid Shifting Sentiment

Market Overview

The start of the trading week has been relatively quiet as the market digests the recent Jackson Hole Symposium and Federal Reserve Chair Jerome Powell’s comments, which hinted at a potential rate cut in the U.S. in September. This shift in sentiment has created a noticeable change in the market’s approach to the USD/CHF pair, with investors showing reduced enthusiasm for the dollar against the Swiss franc, indicating a potential bearish outlook for the greenback against its Swiss counterpart.

Currently, the market is pricing in a 35% chance of a 50 basis points rate cut, but this perspective is likely to become clearer after the U.S. jobs report, due on September 6. The next Federal Reserve decision is scheduled for September 18, leaving ample time for market sentiment to adjust. As a result, the market appears somewhat subdued, awaiting clearer direction for most major currency pairs.

Technical Analysis

The USD/CHF pair has been in a bearish trend on the four-hour chart, continuing its descent after a period of low volatility. The downtrend was confirmed with the break below the key support level at 0.84887. Currently, sellers are facing a critical support level at 0.84563. If the bears manage to break this level, the downtrend is likely to extend towards the next support levels at 0.84362 and potentially 0.84038.

Oscillators Confirmation

RSI (Relative Strength Index): The RSI is positioned in bearish territory, indicating sustained selling pressure and the potential for further downside.

MACD (Moving Average Convergence Divergence): The MACD is also signaling bearish momentum, with the MACD line remaining below the signal line.

Moving Averages: The price is trading below key moving averages, further confirming the bearish trend.

Alternative Scenario

If buyers can regain control and push the price above the key resistance at 0.85412, it would signal a potential reversal to a bullish trend. A break above this level could encourage further buying, targeting higher resistance levels.

Key Levels

Resistance Levels:

• Resistance 4: 0.85412
• Resistance 3: 0.85088
• Resistance 2: 0.84887
• Resistance 1: 0.84744

Current Price (at the time of analysis): 0.84617

Support Levels:

• Support 1: 0.84563
• Support 2: 0.84362
• Support 3: 0.84038

Key Events to Watch

Several economic events this week could impact the USD/CHF pair:

1. ZEW Economic Sentiment Survey (Switzerland): This report will provide insights into economic expectations in Switzerland, potentially influencing the franc’s strength.
2. U.S. Durable Goods Orders (Thursday): A key indicator of manufacturing activity, a better-than-expected figure could support the dollar by suggesting economic resilience.
3. U.S. Core PCE Price Index (Friday): The Federal Reserve’s preferred inflation measure, which could shape expectations for future rate cuts.
4. U.S. Weekly Jobless Claims: A critical indicator of labor market health, which could affect market sentiment towards the dollar depending on the results.

Conclusion

USD/CHF remains under bearish pressure as market sentiment continues to weigh against the dollar, following dovish signals from the Federal Reserve. The technical setup confirms a bearish bias, with key support levels being tested. However, upcoming economic data releases could introduce volatility and provide a clearer direction for the pair. Traders should remain cautious and monitor key levels and economic indicators closely to navigate potential market shifts effectively.