The USDCHF currency pair, in accordance with last week's forecast, has consolidated below 0.9 and continues to move gradually to the area of the May lows. The prices approached the level of 0.89 several times, and it might be broken in the nearest future. At least in the short term the franc will have an advantage over the dollar.
Fed Chair Jerome Powell, who spoke to the U.S. Congress yesterday, clearly disappointed the buyers of the American currency. Powell reiterated statements made after the June 14 meeting about two additional interest rate hikes this year. At the same time, the Fed chair believes that a slowdown in the pace of monetary policy tightening is quite relevant. As a result, market participants are still expecting a rate move of +0.25% at the meeting on July 26, but a second similar increase is out of the question.
Unlike the U.S. regulator, the Swiss National Bank (SNB) did not take a pause and raised its key rate again today, which has now reached 1.75%. Despite a very modest inflation rate of 2.2% by global standards, SNB Chair Thomas Jordan is confident that monetary policy needs to be tightened.
In addition to raising rates, the Swiss regulator also worsened its inflation forecast. Now the return of the price growth below the target level of 2% is not expected until 2026. However, the SNB is ready to continue selling foreign currency and buying francs in order to fight inflation. There is no guarantee that imported goods will thus become significantly cheaper for people in Switzerland, but the exchange rate of the national currency will definitely keep a strong support.
The nearest target for the USDCHF pair is consolidation below the 0.89 level. In case the bears are successful, the way to the May lows around the 0.882 level will be open. The RSI indicator is declining slowly and is still far from the oversold zone, not preventing the downward price movement.
The following trading strategy may be offered:
Sell USDCHF around the level of 0.895. Take profit – 0.89. Stop loss – 0.9.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
