The USD/CHF exchange rate has come under pressure in the past few weeks as the US dollar index (DXY) plunged. The pair retreated to a low of 0.8745, down from October’s high of 0.9246. In all, it has crashed by almost 14% from the highest point this year.
US dollar index retreatThe USD/CHF pair continued its downtrend in November as the US published weak jobs numbers and encouraging inflation figures. According to the Bureau of Labor Statistics (BLS), the economy created over 150k jobs in October while the unemployment rate rose to 3.9%.
A separate report showed that the country’s inflation dropped from 3.7% in September to 3.2% in October. There are signs that inflation will continue falling in the coming months if the downtrend momentum in gasoline continues.
The average gasoline price in the US has dropped to $3.2, down from the year-to-date high of near $4. At the same time, retailers and automakers are offering strong discounts in their bid to attract shoppers. Global ocean shipping prices have dropped as demand fell.
Therefore, the USD to CHF pair has slipped as investors anticipate that the Federal Reserve will start to slash interest rates in 2024. In a statement this week, Bill Ackman, a respected hedge fund manager, predicted that the Fed will slash rates in Q1.
In a surprise move, Christopher Waller, one of the most hawkish Fed officials, said that rates would start coming down sometime in 2024. The recent Fed minutes and Beige Book also suggested that officials were concerned about the slowing economy.
Therefore, the USD/CHF pair price action has coincided with the retreat of the US dollar index (DXY). The DXY has plunged from the year-to-date high of $107.5 to $103.2. It has dropped against most currencies like sterling, euro, and Swedish krona.
Watch here: https://www.youtube.com/embed/GLA0xAYSWfo?feature=oembedUSD/CHF technical analysis
The daily chart shows that the USD to CHF exchange rate has been in a strong bearish trend. It has dropped below the 23.6% Fibonacci Retracement level. At the same time, the pair has moved below the first resistance of the Andrews Pitchfork tool.
The USD to Swiss franc pair has also dropped below the 100-day and 50-day Exponential Moving Averages (EMA). The two indicators have formed a bearish crossover pattern. It has also moved below the support at 0.8822, the lowest point in May.
Therefore, the outlook for the pair is bearish as sellers target the key support at 0.8600. The stop-loss of this trade will be at 0.8825. The next key news to watch will be the upcoming US Personal Consumer Expenditure (PCE) inflation data.
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