Buying USDCHF

Today, there is a shift in sentiment in the financial markets. The previous unbridled optimism of most G10 regulators for policy easing was replaced by more sober assessments.

Officials at JPMorgan Chase & Co., Standard Chartered Plc and Cantor Fitzgerald, said they expect monetary policy to ease slower than the market expected.

"Rapid easing doesn't make sense," said State Street Chairman and CEO Ron O'Hanley. "The Fed has very clearly laid out its dot plot, and I don't know why the markets decided to double it."

As examples, here are more quotes from the Bloomberg interview:

Philipp Hildebrand: "I'm a bit worried that our prices are almost perfect, almost a perfect soft landing, and inflation has gone away as a problem... At some point, we will realize that it's not easy to stabilize to the 2% inflation target that central banks are pushing for, and so the optimism about rates in the U.S. in particular is probably exaggerated."

Sergio Ermotti: "The prospects for four or six rate cuts in 2024 look a bit optimistic".

Christopher Willcox: "our view is that interest rate cuts will come a little later and that there will probably be fewer steps in 2024".

This sentiment reflects the prospect of a slower weakening of the U.S. dollar against a basket of currencies.

From this point of view, the USDCHF currency pair seems interesting. The Swiss franc has the strongest conditions for easing than other leading world currencies: stable GDP growth rate, one of the lowest inflation rates (1.7% year-on-year in December 2023), and a low unemployment rate (2.2% in December). Therefore, the Swiss regulator will be among the first to cut rates.

That is, the USDCHF pair is stronger than other dollar pairs and is set to grow.

From the point of view of technical analysis, the target of such strengthening is the previously untested level of 0.8880.

The final recommendation is to buy USDCHF.

Take profit at the level of 0.8880. A stop-loss could be set at the level of 0.8330