- A strong recovery in USD demand helped USD / CHF regain traction on Monday.
- Risk aversion sustained the safe haven CHF and limited gains for the pair.
- The formation of a rectangle on the hourly charts supports the prospects for further losses.
The pair USD/CHF It fell around 15-20 pips from the daily highs and was last seen trading modest intraday gains around 0.9150.
Concerns about the spread of the highly contagious Delta variant of the coronavirus weighed on investor sentiment. This was evident by risk aversion, which supported the safe haven Swiss franc and limited the upside for the USD / CHF pair.
That said, expectations that the Fed might be getting closer to tightening its monetary policy earlier than anticipated acted as a tailwind for the US dollar. This, in turn, continued to provide some support to the USD / CHF pair and helped limit any significant declines.
From a technical perspective, the intraday movement remained confined to the wider trading range on Friday, forming a rectangle on the hourly charts. Given the recent strong pullback, the rectangle could be classified as a bearish continuation pattern.
Meanwhile, the technical indicators on the daily chart have been losing positive traction and adding credibility to the negative setup. However, the RSI on the 4-hour chart remains close to oversold territory and warrants some caution for aggressive bearish traders.
Therefore, it will be prudent to wait for a strong follow-up sell below the 0.9130 region, or the daily lows, before positioning for any further depreciation movement. The USD / CHF pair could accelerate the decline towards the 0.9100 level.
Any subsequent decline is likely to find decent support near the very important 200-day SMA, currently around the 0.9070 region. Failure to defend the mentioned support levels will be seen as a new trigger for bearish traders and will lead to further technical selling.
On the other hand, the 0.9170-75 region could continue to act as a strong immediate resistance. This is followed by the 0.9200 round mark, which if cleared should allow the USD / CHF pair to retest the three-month highs, around the 0.9270-75 region touched earlier this month.
1 hour chart
Technical levels
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