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USDCHF Long-term Trend Remains Downward

1/17/2023 1:43 PM

The US currency is losing ground in relation to risky assets, acting as a driver of the downward dynamics of the quotes of the USD/ CHF pair to the area of the current month's minimum of 0.9167.

The weakness of the USD is due to the fact that investors are disappointed by the sharp decline in inflation: the consumer price index adjusted from 7.1% to 6.5% on an annualized basis, and the base indicator — from 6.0% to 5.7%, while on a monthly basis the value decreased by 0.1% for the first time since 2020, which strengthened the opinion of bidders, that the US Fed will continue to soften the "hawkish" rhetoric.  Futures markets, according to the CME Group's Fed Watch Tool, estimate the probability of an interest rate increase in February by 25.0 basis points at 90.0%, and the remaining 10.0% assume an adjustment of 50.0 basis points. The transition to a lower rate of monetary policy tightening weakens the US currency and contributes to the redirection of investor capital.

As for the Swiss economy, on Thursday the market's attention will be drawn to the December producer price index, which records the change in the price level of goods, components and raw materials on the wholesale market and is one of the most important indicators of inflation. The growth of the indicator above the November value of -0.5% may further strengthen the Swiss franc and support the "bears" in the USD/CHF pair.

The long-term trend remains descending. Last week, the price tried to recover to the level of 0.9400, but the growth was limited by the resistance of 0.9300. This week, we can assume a further decline in the asset with a target at 0.9190, if it is broken down, the fall will continue to the area of 0.9090.

The mid-term trend is also downtrend. Now market participants are trying to break the target zone 3 (0.9260–0.9229), and if successful, the next target will be target zone 4 (0.8961–0.8932). The trend boundary shifts to 0.9512–0.9479. If, as part of the correction, this resistance is tested by the price, then it will be possible to consider new sales with a target at last week's low of 0.9167.

Resistance levels: 0.9300, 0.9400, 0.9500. | Support levels: 0.9190, 0.9090, 0.9030.

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