- USD/CHF drifts lower for the second straight day and is pressured by modest USD weakness.
- The risk-on mood could undermine the safe-haven CHF and help limit any further downside.
- Traders might also refrain from placing aggressive bets ahead of the crucial FOMC decision.
The USD/CHF pair attracts fresh selling following an intraday uptick to the 0.8655 region and drifts into negative territory for the second successive day on Wednesday. Spot prices drop to a fresh weekly low during the early European session and currently trade around the 0.8620 area, down nearly 0.20% for the day.
The US Dollar (USD) extends the overnight modest pullback from a two-week high and continues losing ground for the second straight day, which turns out to be a key factor exerting some downward pressure on the USD/CHF pair. The USD downtick could be attributed to some repositioning trade ahead of the crucial FOMC decision, though is likely to remain limited as traders await fresh cues about the near-term policy outlook.
It is worth mentioning that the markets have been pricing out the possibility of any further rate hikes this year after the widely expected 25 bps later this Wednesday. Investors, however, remain sceptic if the Federal Reserve (Fed) will commit to a more dovish stance on the back of an extremely resilient US economy. In fact, Tuesday's upbeat US Consumer Confidence Index raised optimism that the economy could skip a recession this year.
Hence, the accompanying monetary policy statement and Fed Chair Jerome Powell's comments during the post-meeting press conference will be scrutinized closely for hints about the future rate-hike path. This, in turn, will influence the USD dynamics and provide a fresh directional impetus to the USD/CHF pair. In the meantime, a positive risk tone might undermine the safe-haven Swiss Franc (CHF) and lend support to spot prices.
Investors continue to cheer China's pledge to step up support for its fragile economy, which remains supportive of the bullish sentiment across the global equity markets. It is worth recalling that state news agency Xinhua cited the Politburo - the top decision-making body of the ruling Communist Party - saying that China will step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence and preventing risks.
The aforementioned fundamental backdrop supports prospects for the emergence of some dip-buying at lower levels and warrants some caution for aggressive bearish traders. That said, it will be prudent to wait for a sustained move beyond the overnight swing low, around the 0.8700 mark, before confirming that the USD/CHF pair has bottomed out near the 0.8560 region, or the lowest level since January 2015 touched earlier this month.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD struggles to recover above 1.0900 as markets remain cautious
EUR/USD stays on the back foot and trades below 1.0900 following Thursday's sharp decline. Dovish comments from European Central Bank officials and the risk-averse market atmosphere make it difficult for the pair to stage a rebound on Friday.
GBP/USD falls toward 1.2900, looks to post weekly losses
GBP/USD continues to push lower toward 1.2900 in the American session on Friday. Disappointing Retail Sales data from the UK, combined with the US Dollar (USD) recovery amid souring mood, causes the pair to stay under bearish pressure ahead of the weekend.
Gold extends daily slide, trades near $2,400
Gold's correction from the record-high set earlier in the week deepens on Friday. With the US Dollar (USD) benefiting from safe-haven flows and the 10-year US yield holding steady above 4.2%, XAU/USD tests $2,400 and looks to post small weekly losses
Top 10 crypto market movers as Bitcoin and Ethereum hold steady ahead of $1.8 billion options expiry
Bitcoin and Ethereum hold steady above $64,000 and $3,400 as $1.8 billion in options expire on Friday. WazirX hack of $230 million potentially linked to Lazarus Group ushers correction in Shiba Inu, among other assets.
Week ahead – Flash PMIs, US GDP and BoC decision on tap
US data awaited amid overly dovish Fed rate cut bets. July PMIs to reveal how economies entered H2. BoC decides on monetary policy, may cut rates again.