USDCHF pair level of 0.955 is an important resistance, and there has been an upward reversal from it twice in recent months. However, this time “bears” are more determined, and in case of their success there is a space for USDCHF down to the level of 0.91.
The weakening of the dollar, which is seen from the middle of July, is connected with expectations for the future level of interest rate decrease. Fears about possible 1% increase in the rate weren’t realized (the Fed only repeated the June 0,75% increase). Also, yesterday's Q2 US GDP statistics became an additional boost to break the level of 0.955 for USDCHF.
Instead of a GDP increase of 0.5% (consensus among market participants) one more decrease was observed, now it was a 0.9% decrease. The second quarter of the decline in GDP in a row (after -1.6% in the Q1 of this year) formally allows us to regard the situation in the American economy as a recession. However, almost all officials (including the president, the secretary of the Treasury and the head of the Fed) refused to acknowledge the onset of the economic crisis, using such phrases as formulations such as "slowdown" or "soft landing."
Immediately comes to mind a comment of American officials about inflation, which throughout the last year was being assessed as temporary. Result, however, is known, the price increase exceeds 9%, a maximum of the past 40 years. The official acknowledgement of economic problems may be delayed, but eventually market expectations already take into account a recession, a halt in tightening the Fed's monetary policy and a decrease in rate levels in late spring and early summer next year.
Expectations of a recession and the resulting lower level of U.S. interest rates will gradually lead to a decrease of USDCHF. The nearest target is the level of 0.945. The RSI yet hasn’t entered the oversold area and assumes the level of 0.945 in the near future. In case quotes are fixed below 0.945 medium-term benchmarks will shift to 0.92 and 0.91.
Following trade strategies may be suggested:
1) Short-term: sell USDCHF at current price. Take profit – 0.945. Stop loss – 0.955.
2) Mid-term: sell USDCHF when fixed below 0.945. Take profit 1 – 0.92. Take profit 2 – 0.91. Stop loss – 0.955.
Also, traders, at their discretion, can use the Trailing stop instead of the fixed Stop loss.