USDCHF Downtrend: Bearish Momentum Meets SNB Rate Cut Speculation

The USDCHF pair has been in a downtrend since reaching a high of 0.92231 on May 1, primarily influenced by technical factors including moving average crossovers and a failure swing reversal. Although the bearish momentum has softened in recent sessions, anticipation of an impending rate cut by the Swiss National Bank has renewed pressure on the Swiss franc. Market participants should monitor key resistance and support levels closely, alongside critical technical indicators, to evaluate potential market direction in light of these evolving dynamics.

Thursday 10:30 am (GMT+3) – Switzerland: SNB Policy Rate (CHF)

Thursday 15:30 (GMT+3) – USA: Final GDP q/q (USD)

Thursday 15:30 (GMT+3) – USA: Unemployment Claims (USD)

Friday 15:30 (GMT+3) – Canada: GDP m/m (CAD)

Friday 15:30 (GMT+3) – USA: Core PCE Price Index m/m (USD)

The USDCHF pair has been on a downward trajectory since reaching a high of 0.92231 on May 1. The decline was driven by a combination of technical factors that reinforced the bearish momentum. Notably, a failure swing reversal pattern emerged when the peak at 0.91573 failed to surpass the previous peak, leading to a subsequent drop below the trough at 0.89869, confirming the downtrend. Additionally, the double crossover between the 20-period and 50-period Exponential Moving Averages (EMA) further accelerated the downward pressure.

Moreover, the narrowing of the Bollinger Bands, commonly referred to as a “squeeze,” suggests that a breakout may be imminent. Key technical indicators lend further support to the downtrend. While the price remains above the 20-period EMA and the Momentum oscillator is above the 100 baseline, the Relative Strength Index (RSI) remains below the 50 mark, and prices are also trading below the 50-period EMA, indicating mixed signals that warrant close monitoring.

Should the buyers take market control, traders may direct their attention toward the four potential resistance levels below:

0.85486: The initial resistance is set at 0.85486, which corresponds to the daily high marked on September 12.

0.86469: The second price objective is projected at 0.86469, corresponding to the 161.8% Fibonacci Extension, calculated between the swing high of 0.85486 and the swing low of 0.83895.

0.87470: The third price target is established at 0.87470, aligning with the peak from August 15.

0.88060: An additional price target is seen at 0.88060, estimated at the 261.8% Fibonacci Extension drawn from the peak of 0.85486 down to the trough of 0.83895.

Should the sellers maintain market control, traders may consider the four potential support levels listed below:

0.83728: The initial support level is identified at 0.83728, reflecting the daily low from September 6

0.83319: The second support level is situated at 0.83319, in alignment with a weekly low recorded in December 2023.

0.82360: The third support level is positioned at 0.82360, representing the 161.8% Fibonacci Extension drawn from the swing low of 0.84312 to the swing high of 0.87470.

0.79202: An additional downside target is noted at 0.79202, corresponding to the 261.8% Fibonacci Extension drawn from the swing low of 0.84312 to the swing high of 0.87470.

Switzerland’s central bank is expected to cut its key interest rate by at least 0.25 percentage points at its meeting on September 26, following similar cuts in March and June. The rate currently stands at 1.25%, but mounting pressure from industries, such as the watchmaking and engineering sectors, is pushing for further reductions to counter the strengthening of the Swiss franc. While most economists anticipate a 0.25-point cut, some speculate a larger 0.50-point reduction may be possible, particularly in light of recent global monetary policy shifts and the franc’s appreciation.

In conclusion, while the USDCHF has experienced sustained bearish momentum driven by technical factors, the potential for a rate cut by the Swiss National Bank could further impact the pair’s direction. Market participants should remain vigilant, closely tracking key support and resistance levels alongside evolving technical indicators to navigate potential shifts in momentum.