USD/CHF resumes its decline as dovish bets on the Fed and lower US yields weigh in


  • The USD/CHF declined towards the 0.8400 level with a 0.40% loss.
  • Markets currently anticipate a significant 160 basis points of easing by the Fed in 2024.
  • The pair ends the year with a 9% depreciation and marks its third consecutive weekly loss.

In Friday's trading session, the USD/CHF pair endured losses as it declined to 0.8405. The pair resumed its weakening trend, pressured by dovish bets on the Federal Reserve (Fed) and the impact of lower US yields, which that weighed heavily on the pair's dynamics.

At their last 2023 meeting, the Federal Reserve recognized a deceleration in inflation and a cooling of the economic activity, endorsing the absence of interest rate increases in 2024 whilst forecasting a 75 bps reduction as per the median terminal rate of the Dot Plot from the Summary of Economic Proyections (SEP). Now, market expectations account for rate cuts in both March and May, and some traders are placing bets on a cut a soon as in the upcoming meeting in January. The market's being overconfident that the Fed will start the easing cycle sooner than expected is weakening the US dollar.

The US Treasury yields are mixed, with some rates up and others down while remaining near multi-month lows. The 2-year rate is positioned at 4.27%, while the 5-year and 10-year rates are registered at 3.84% and 3.87% respectively. As yields descend, reflecting the mentioned dovish expectations, it results in a concurrent disadvantage for the USD, pushing down the USD/CHF.

In the upcoming week, markets await US labor market figures. Key insights will encompass December's Nonfarm Payrolls, Wage Inflation, and Unemployment Rate all closely monitored by the Fed.

USD/CHF levels to watch

Reflecting on the technical indicators from the daily chart, it's evident the selling pressure is currently in command. The pair is positioned under the critical levels of the 20, 100 and 200-day Simple Moving Averages (SMAs), underscoring the dominance of sellers in the broader market context.

The Relative Strength Index (RSI) reading conveys an oversold market condition, hinting at a potential reversal as bears may step back to consolidate. However, the presence of rising red bars in the Moving Average Convergence Divergence (MACD) signals that bearish momentum continues to ascend, adding an extra layer of challenge for the buyers.

In the short term, the rising bearish momentum evident from the MACD could temper a bullish reversal despite the RSI suggesting an oversold market scenario. Consequently, the aggressive selling pressure, accentuated by the position of the pair below the critical SMAs, continues to dominate the short-term technical outlook of the market.


Support Levels: 0.8400, 0.8350, 0.8330.
Resistance Levels: 0.8500, 0.8530, 0.8600.


USD/CHF daily chart

 

USD/CHF

Overview
Today last price 0.8406
Today Daily Change -0.0035
Today Daily Change % -0.41
Today daily open 0.8441
 
Trends
Daily SMA20 0.8655
Daily SMA50 0.8819
Daily SMA100 0.8888
Daily SMA200 0.8907
 
Levels
Previous Daily High 0.8446
Previous Daily Low 0.8333
Previous Weekly High 0.8712
Previous Weekly Low 0.8514
Previous Monthly High 0.9113
Previous Monthly Low 0.8685
Daily Fibonacci 38.2% 0.8403
Daily Fibonacci 61.8% 0.8376
Daily Pivot Point S1 0.8367
Daily Pivot Point S2 0.8293
Daily Pivot Point S3 0.8254
Daily Pivot Point R1 0.848
Daily Pivot Point R2 0.852
Daily Pivot Point R3 0.8594

 

 

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