- 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
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 climbs above 1.0500 on persistent USD weakness
EUR/USD preserves its bullish momentum and trades above 1.0500 on Monday. In the absence of high-impact data releases, the risk-positive market atmosphere makes it difficult for the US Dollar (USD) to find demand and helps the pair push higher.
GBP/USD rises to 1.2600 area as mood improves
Following a short-lasting correction, GBP/USD regains its traction and trades at around 1.2600. The US Dollar struggles to stay resilient against its rivals as market mood improves on Monday, allowing the pair to build on its bullish weekly opening.
Gold price manages to hold above $2,650 amid sliding US bond yields
Gold price maintains its heavily offered tone through the early European session on Monday, albeit manages to hold above the $2,650 level and defend the 100-period Simple Moving Average (SMA) on the 4-hour chart. Scott Bessent's nomination as US Treasury Secretary clears a major point of uncertainty for markets.
Bitcoin consolidates after a new all-time high of $99,500
Bitcoin remains strong above $97,700 after reaching a record high of $99,588. At the same time, Ethereum edges closer to breaking its weekly resistance, signaling potential gains. Ripple holds steady at a critical support level, hinting at continued upward momentum.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.