USD/CHF Retreats Amidst Lower US Treasury Yields

USD/CHF Retreats Amidst Lower US Treasury Yields

The USD/CHF currency pair is currently navigating a complex landscape, marked by a pullback in the US Dollar, potentially fueled by lower US Treasury yields. Despite the initial cheers from hawkish remarks by Federal Reserve officials, the Greenback finds itself facing challenges, with risk aversion sentiment lending some support. Additionally, the Swiss Franc has experienced selling pressure, triggered by concerns raised by Swiss National Bank (SNB) Chairman Thomas Jordan regarding the impact of CHF's strength on inflation and the broader domestic economy.

Technical Analysis:

From a technical standpoint, the forecast remains clear, indicating a possible continuation of the bearish trend. The failure to breach the resistance at 0.8700, coupled with the rejection at the confluence of the Dynamic trendline and the 78.6% Fibonacci level, suggests that the bears might still have the upper hand. Traders are keenly watching for any signs of a new bearish impulse aligning with the established downtrend.

SNB's Inflation Concerns:

The recent selling pressure on the Swiss Franc can be attributed to SNB Chairman Thomas Jordan's expressed worries about the CHF's strength and its potential impact on the SNB's ability to maintain inflation above zero. This concern arises despite some positive economic indicators, such as a slight increase in Swiss consumer prices in December and an improvement in consumer demand in November.

Economic Indicators:

While recent economic indicators paint a mixed picture, with positive signs in consumer prices and demand, Swiss Producer and Import Prices (YoY) witnessed a decline in December, following a similar trend in November. These more moderate figures may temper the SNB's decision-making in the upcoming meeting, as they grapple with the delicate balance of supporting economic recovery while ensuring inflation remains within a stable range.

SNB's Commitment to Monetary Policy:

In the SNB's last policy update in December, the central bank reiterated its commitment to adjusting monetary policy if necessary to maintain inflation within a range consistent with price stability over the medium term. The cautious stance suggests that despite the recent economic fluctuations, the SNB remains vigilant and ready to act to ensure economic stability.

Conclusion:

As the USD/CHF pair faces headwinds from lower US Treasury yields and the SNB's inflation concerns, traders are keeping a close eye on technical indicators and the broader economic landscape. The failure to breach key resistance levels indicates a potential continuation of the bearish trend. However, the SNB's commitment to adjusting monetary policy underscores the uncertainty in the current economic environment. Traders should remain vigilant and adapt their strategies accordingly, considering both technical and fundamental factors shaping the USD/CHF trajectory.

Our preference

Short positions Below 0.88200 with targets at 0.85200 & 0.8400 in extension.

Comment:

The price has responded as anticipated, reacting at the 78.6% Fibonacci level. This suggests that the price is poised for a downward movement.

Comment:

Double confirmation. Setup VALID.

Comment:

✅ VALID