USD/CHF Struggles as More Fed Officials Prepare to Adjust Policy

US Dollar Outlook: USD/CHF

USD/CHF struggles to retain the rebound from earlier this week as a growing number of Federal Reserve officials show a greater willingness to lower US interest rates, but the exchange rate may further retrace the decline from the start of the month should it no longer respond to negative slope in the 50-Day SMA (0.8066).

USD/CHF Struggles as More Fed Officials Prepare to Adjust Policy

Keep in mind, USD/CHF bounced back ahead of the July low (0.7872) to close above the moving average for the first time since February, and the development may indicate a potential change in trend as the exchange rate trades back above the former support zone around the April low (0.8040).

In turn, the pullback in USD/CHF may turn out to be temporary should it defend the rebound from the monthly low (0.8027), but speculation for a looming change in Fed policy may produce headwinds for the US Dollar as Minneapolis Fed Bank President Neel Kashkari warns that ‘the real underlying economy is slowing’ during an interview on CNBC.

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As a result, Kashkari states that ‘it may become appropriate to start adjusting the federal funds rate,’ and it seems as though the central bank will stay on track to further unwind its restrictive policy as Governors Michelle Bowman and Christopher Waller preferred a rate-cut in July.

With that said, failure to hold above the monthly low (0.8027) may push USD/CHF toward the July low (0.7872), but the exchange rate may attempt to test the June high (0.8250) should it no longer track the negative slope in the 50-Day SMA (0.8066).

USD/CHF Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CHF Price on TradingView

• USD/CHF seems to be stuck in a narrow range as it gives back the rebound from the earlier this week, but the exchange rate may retrace the decline from the monthly high (0.8172) amid the failed attempts to close below the 0.8030 (38.2% Fibonacci extension) to 0.8080 (23.6% Fibonacci retracement) zone.
• Need a move/close above 0.8200 (23.6% Fibonacci extension) to bring the June high (0.8250) on the radar, with the next area of interest coming in around 0.8360 (100% Fibonacci extension).
• At the same time, a close below the 0.8030 (38.2% Fibonacci extension) to 0.8080 (23.6% Fibonacci retracement) zone may push USD/CHF toward 0.7900 (50% Fibonacci extension), with a breach of the July low (0.7872) opening up the 0.7760 (61.8% Fibonacci extension) to 0.7810 (161.8% Fibonacci extension) region.

Additional Market Outlooks

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Canadian Dollar Forecast: USD/CAD Coils Ahead of Canada Employment

Gold Price Climbs Toward July High

Australian Dollar Forecast: AUD/USD Holds Above June Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong