USD/CHF Defends January Low to Stage Three-Day Rally

US Dollar Outlook: USD/CHF

USD/CHF appears to be defending the January low (0.8966) as it stages a three-day rally.

USD/CHF Defends January Low to Stage Three-Day Rally

USD/CHF carves a series of higher highs and lows as it extends the rebound from the monthly low (0.8973), and the exchange rate may climb back towards the monthly high (0.9197) as the Federal Open Market Committee (FOMC) Minutes reveal that ‘the current high degree of uncertainty made it appropriate for the Committee to take a careful approach in considering additional adjustments to the stance of monetary policy.’

The transcript from the January meeting suggests the Federal Reserve is in no rush to implement lower interest rates as ‘many participants noted that the Committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated,’ and the central bank may stick to the sidelines at its next rate decision on March 19 amid little signs of a looming recession.

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In turn, waning expectations for an imminent Fed rate-cut may fuel the recent rebound in USD/CHF, but the exchange rate may no longer respond to the positive slope in the 50-Day SMA (0.9047) after closing below the moving average for the first time since October.

With that said, USD/CHF may track the January range as it extends the rebound from the monthly low (0.9028), but the recovery in the exchange rate may turn out to be temporary if fails to defend the January low (0.8966).

USD/CHF Price Chart – Daily

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

• USD/CHF trades to a fresh weekly high (0.9055) as it stages a three-day rally, with a breach above the monthly high (0.9197) raising the scope for a test of the January high (0.9201).
• Need a close above 0.9180 (23.6% Fibonacci extension) to bring the October 2023 high (0.9245) on the radar, but USD/CHF may struggle to extend the recent series of higher highs and lows should it struggle to hold above the 0.9030 (38.2% Fibonacci extension) to 0.9040 (23.6% Fibonacci extension) region.
• Failure to defend the January low (0.8966) may push USD/CHF towards the 0.8880 (38.2% Fibonacci retracement) to 0.8910 (38.2% Fibonacci extension) zone, with the next region of interest coming in around 0.8770 (61.8% Fibonacci extension) to 0.8800 (50% Fibonacci extension).

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--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong