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USD/CHF Buyers Aim to Break Key Resistance as Dollar Gains Momentum

USD/CHF Buyers Aim to Break Key Resistance as Dollar Gains Momentum

Market Overview

On Monday, the US dollar gained strength after disappointing economic activity data weighed down the euro. The dollar index, which measures the greenback against a basket of six other major currencies, rose by 0.5% to 100.925, slightly above its 12-month low. This upward movement follows the significant rate cut by the Federal Reserve last week, as traders shift their focus from recession fears toward a “soft landing” narrative highlighted by Fed Chair Jerome Powell.

Investor sentiment has improved, reflecting in gains across major equity indices. The CME FedWatch tool now shows that traders are pricing in 75 basis points of rate cuts by the end of this year, with nearly 200 additional basis points of reductions expected by December 2025. This optimism has contributed to the dollar’s recovery from oversold conditions, as traders become more confident in the Fed’s measured approach to handling the economic slowdown.

Technical Analysis

USD/CHF remains range-bound on the four-hour chart, having moved sideways following a previous downward trend. Currently, buyers are testing the recent price top at 0.85145, a key resistance level. If buyers successfully break above this resistance, it could pave the way for further gains, targeting 0.85324, 0.85418, and 0.85552, around the top of the rectangle pattern.

Momentum oscillators also indicate growing buying pressure. The RSI is climbing, suggesting stronger demand, while the widening Bollinger Bands with prices moving close to the upper band further confirm the building bullish momentum.

Alternative Scenario

However, if sellers defend the current resistance, the pair may retrace towards the immediate support at 0.84486. A break below this level would signal a move back toward the bottom of the rectangle pattern, potentially extending the consolidation.

Key Levels Overview

  • Resistance Levels:
    • Resistance 1: 0.85324
    • Resistance 2: 0.85418
    • Resistance 3: 0.85552
    • Resistance 4: 0.85804
  • Current Price: 0.85142
  • Support Levels:
    • Support 1: 0.84486

Key Events to Watch

Traders are focused on the preliminary PMI data for the US, set to be released later today. The manufacturing PMI is expected to show improvement, while the services PMI might indicate cooling activity. In addition, Federal Reserve official Neel Kashkari will deliver a speech tonight, potentially offering more clarity on the Fed’s plans for future rate cuts. His remarks could provide valuable insights into the central bank’s strategy, influencing the direction of the US dollar.

Conclusion

USD/CHF is at a critical juncture, with buyers attempting to break a key resistance level at 0.85145. A successful breakout would likely lead to further gains toward the next resistance levels at 0.85324 and 0.85552. However, if sellers manage to hold the line, the pair could pull back toward 0.84486. Traders should monitor today’s PMI releases and Fed commentary for signals that could drive the next major move in the pair.

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