USDCHF currency pair made several attempts to consolidate above 0.91 level during the last two weeks, but they were unsuccessful. The upward trend of the dollar on the world currency market stopped and the "bears" decided to create a fall impulse of the USDCHF to the level of 0.9. This drawdown was completely bought back just in 2 days, but a local decline of the dollar against the franc is the most probable scenario in the current news background.
The day before the weakness of the U.S. currency was caused by the release of inflation statistics for May. The rate of price growth slowed significantly from 4.9% to 4%, exceeding expectations of 4.2%. At the same time, core inflation fell less significantly, only by 0.2% to 5.3%. Nevertheless, these numbers will definitely be enough to decide whether to pause the interest rate hike cycle at today's Fed meeting.
Market participants are more interested not in the decision of the U.S. financial regulator, but in a further press conference with Chairman Jerome Powell. Perhaps, maintaining the rate unchanged at 5.25% will be accompanied by moderately harsh rhetoric, as inflation is still far from the Fed's target of 2%.
It should be noted that the Fed's pause in June does not guarantee the end of the entire cycle of monetary policy tightening. Investor and trader expectations for the next meeting of the U.S. regulator, which will be held on July 26, indicate this. Currently, the probability of a rate increase to 5.5% exceeds 60%. Therefore, it is better to not go in for mass sales of the dollar, and fix profits immediately at pre-selected levels of Take profit.
The nearest downside target for the USDCHF is the round level of 0.9, as well as last week's local low in the 0.898-0.899 range. As long as the quotes are below the level of 0.908, this scenario remains the main one.
The following trading strategy option can be suggested:
Sell USDCHF in the range of 0.903-0.905. Take profit 1 – 0.9. Take profit 2 – 0.898. Stop loss – 0.908.
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.
