USD/CHF Buyers Face Another Key Resistance Test
Market Overview
The USD/CHF pair continues to recover as investors reassess economic risks and market sentiment shifts in favor of the dollar. Concerns over a potential US recession have increased following weaker-than-expected labor market data, which showed a decline in job openings for February. Goldman Sachs estimates the likelihood of a US recession at 40%, adding to market caution.
Despite these concerns, the US dollar has rebounded after a significant correction, benefiting from renewed demand as risk sentiment shifts. At the same time, hopes for a ceasefire in Ukraine have dampened demand for safe-haven assets, leading to a weaker Swiss franc. As a result, USD/CHF has moved higher, with buyers attempting to extend the recovery from its two-week downtrend.
Technical Analysis
On the two-hour chart, USD/CHF is forming a bullish reversal pattern following a two-week downtrend. Buyers have established two higher lows, indicating an effort to maintain price stability above the 0.88252 support level.
Currently, the pair is testing the 0.88358 resistance for the second time, a key level that also aligns with the 100-period moving average. A break above this resistance could strengthen the bullish momentum, paving the way for further upside towards 0.88492, followed by 0.88640 and 0.88880.
Momentum indicators also support the bullish bias. The RSI remains above 50, indicating continued buying interest, while the MACD histogram is growing in the positive zone, suggesting increasing upward momentum.
However, if buyers fail to push past the 0.88358 resistance, the risk of a downside correction increases. Sellers will need to break below 0.88104 to gain control, with further downside targets at 0.87864, which would invalidate the bullish reversal scenario.
Key Technical Levels
- Resistance 1: 0.88358
- Resistance 2: 0.88492
- Resistance 3: 0.88640
- Resistance 4: 0.88880
- Support 1: 0.88252
- Support 2: 0.88104
- Support 3: 0.87864
Fundamental Drivers
Investors are closely monitoring the upcoming US inflation data, which is expected to provide insights into the Federal Reserve’s next policy steps. Market forecasts suggest a slowdown in inflation, with the core monthly CPI expected to rise by 0.3%, while the headline inflation rate is projected to slow from 0.5% to 0.3% month-on-month.
If inflation cools as expected, it could ease pressure on the Federal Reserve to maintain a restrictive policy stance, potentially capping further gains in the US dollar. Conversely, stronger-than-expected inflation data could fuel speculation about higher-for-longer interest rates, further supporting the USD/CHF uptrend.
Conclusion
The USD/CHF pair is attempting a bullish reversal, with buyers pushing against the 0.88358 resistance level. A breakout above this key level could confirm further gains, while failure to breach resistance could lead to a short-term retracement toward support levels. Upcoming US inflation data will be a major driver of market direction.
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