USD/CHF. Analysis and Forecast

[Ben Graham]

The USD/CHF pair is trying to rebound from the 0.7950 level but so far without success. The U.S. dollar has been attempting to find support from buyers since the start of the new week, partly offsetting losses after the disappointing U.S. Nonfarm Payrolls report, which came in weaker than expected and pushed the currency to its lowest level in more than a month.

In addition, the generally optimistic risk sentiment in markets typically reduces demand for the Swiss franc as a safe-haven currency, creating favorable conditions for USD/CHF growth. However, the dollar's strengthening potential is limited by expectations of more decisive monetary easing by the Federal Reserve. Market participants are already pricing in a likely Fed rate cut in September and three cuts by year-end. This will cap significant dollar appreciation and restrain USD/CHF upside.

From a technical standpoint, Friday's close below the key 0.8000 level for the first time since July 25 suggests that the most probable direction for spot prices is lower, especially since oscillators on the daily chart remain negative. As such, any recovery attempts may be viewed as selling opportunities, which will likely fade quickly in the absence of U.S. economic data capable of shifting market sentiment.

Attention now turns to upcoming U.S. inflation data — the Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. These key releases will define the next trajectory of the U.S. dollar and provide a significant impulse for USD/CHF in the second half of the week.

The material has been provided by InstaForex Company - www.instaforex.com