The USDCHF currency pair, as it was indicated in the forecast last week, continued to bounce up from a two-year low. Quotes broke through the 0.894 level and now are moving towards monthly highs above the round level of 0.9. After breaking the previous falling trend on the daily chart there is an upward trend forming now, where USDCHF is gradually recovering the positions lost in March and April.
The situation with the U.S. debt ceiling remains under attention of the financial market participants. Investors and traders are nervous as they see the failed attempts by U.S. officials to reach an acceptable agreement. Although yesterday the Republican leader of the House of Representatives, Kevin McCarthy, announced the possible deal before the end of the week, there was no significant positive sentiment in the market. The active buying of treasury bonds continues, causing the growth of the dollar.
The growth of the U.S. currency was also supported by speeches of several representatives of the Federal Reserve System. John Williams, Thomas Barkin, and Austan Goolsby noted that inflation remains unacceptably high, making the easing of monetary policy impossible for at least the next few months. At the same time, the chairman of the Federal Reserve Bank of Cleveland, Loretta Mester, who is considered as one of the main "hawks" of the Fed, clearly expressed the need for an even greater increase in interest rates.
These statements of U.S. officials are gradually changing the expectations of market participants regarding the next Fed meeting, scheduled for June 14. If a week ago almost no one had any doubts about the coming pause in the monetary cycle, now the probability of another 0.25% increase in interest rates has already exceeded 20%. Such a change in forecasts supports the strengthening of the dollar, also against the franc.
The current wave of growth in the USDCHF is going quite smoothly, and the technical indicators are still far from overbought state. After a breakdown of the round level of 0.9, the price might head towards the level of 0.904.
The following trading strategy option can be suggested:
Buy USDCHF in a range of 0.898-0.9. Take profit – 0.904. Stop loss – 0.895.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
