USD:
The US dollar opened the week lower yesterday after the US halted its
strikes following 13 consecutive days of attacks, while Iran pledged to
maintain a ceasefire so long as the US remained on pause.
This has led to some optimism as traders took this
latest development as an early sign of a potential de-escalation and triggered
a selloff in oil prices.
Despite this positive development, the greenback
erased the losses and printed a new weekly high. The support hasn’t come from
Treasury yields or economic data, so this suggests that it might have been just
hedging activity ahead of tomorrow’s FOMC decision.
The Fed is expected to hold interest rates steady but there might be one or
two dissenters voting for a rate hike at this meeting already. The forward
guidance will likely remain limited again under Fed Chair Warsh, but based on
recent comments from policymakers, the pace of monthly inflation increases will
dictate the potential tightening pace.
If the situation in the Middle East remains calm and the Fed delivers on
expectations without any hawkish surprise, then we might see some short-term relief
rally in the markets which could weigh on the US dollar. On the other hand, if
we get another escalation or the Fed delivers a hawkish surprise, then the
greenback will likely get a boost and extend the gains into new highs.
CHF:
On the CHF side, the
currency weakened across the board yesterday following a Bloomberg report
saying that the SNB was set to keep its key interest rate at zero until the end
of 2027 before probably starting to raise it, according to people familiar with
the thinking inside the central bank.
Traders have been pricing
in small chances of a rate hike this year given the CHF weakness since March and
the energy shock, but core inflation in Switzerland has been falling since 2023
and recently dropped to 0.3%. All in all, it shouldn’t be surprising to see the
SNB remaining on hold for a long time.
USDCHF TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDCHF is breaking above the August 2025 high when Fed Chair Powell
opened the door for rate cuts. The buyers will likely continue to pile in
around these levels to extend the rally into the May 2025 high around the 0.85
handle. The sellers, on the other hand, will want to see the price falling back
below the 0.8172 level to position for a pullback into the 0.8030 support.
USDCHF TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the bullish momentum. We can expect the
buyers to lean on the trendline with a defined risk below it to keep pushing
into new highs, while the sellers will look for a break lower to pile in for a
drop into the 0.8030 support next.
USDCHF TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as from a risk management perspective, the buyers will
have a better risk to reward setup around the trendline, while the sellers will
need a break to gain more conviction for further downside. The red lines define
the average daily rangefor today.
UPCOMING CATALYSTS
Today, we have the US
Consumer Confidence report and Trump-Netanyahu meeting. Tomorrow, we have the
FOMC rate decision. On Thursday, we get the US PCE price index, the Advance Q2
GDP and the Jobless Claims figures. On Friday, we conclude the week with the US
Q2 Employment Cost Index. Traders will also keep monitoring US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.