- Political factors centered around the upcoming presidential turnover influenced market sentiments on Monday.
- Markets are bracing themselves for a packed US economic calendar, creating a volatile week for the USD.
- Dovish bets on the Fed remain steady.
On Monday, the USD/CHF gained slightly to 0.8895. Markets are digesting the announcement of US President Joe Biden withdrawing from the presidential race, which caused risk appetites to shift which might limit the upside for the pair. Monday looks quiet, but markets are preparing for a busy week with the US economic calendar.
Joe Biden's expected departure from the presidential race favored former President Donald Trump, causing investors to shift towards riskier assets. This, along with the anticipation of a dovish stance from the Federal Reserve, limits the upside for the US Dollar. Investors this week will focus on key indicators such as the Gross Domestic Product (GDP) Q2 revisions and Personal Consumption Expenditures (PCE). These elements are anticipated to add a layer of volatility to the USD. In addition, the S&P PMIs to be released on Wednesday will be closely monitored.
Regarding the Federal Reserve position, markets are betting on a 90% chance of a cut in September, but these odds might change with the week’s economic data.
USD/CHF technical analysis
The short-term technical outlook for the pair is neutral to bearish. The USD/CHF is currently below the 20-day and 100-day Simple Moving Average (SMA) and the focus is on whether the buyers will defend the 200-day SMA. Meanwhile, technical indicators remain relatively level, but in negative territory.
Key support levels are at 0.8880 (the 20-day SMA), 0.8850, and 0.8830, while resistance levels stand at 0.8890, 0.8900, and 0.8930.
USD/CHF daily chart
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Like many, I applaud Biden’s decision. I would have preferred that he’d made it sooner, but there’s still plenty of time for the Democrats to run a successful campaign. In fact, I wish something on the order of a two-month campaign – as opposed to a two-year campaign – were the norm and not the exception.