USD/CHF advances as markets wait for a new catalyst

• USD/CHF is showing slight gains near the 0.8800 area.
• The pair continues to trade sideways since early August.
• Aggressively, comments from the Fed’s Thomas Barking boosted the USD.
• Investors await Powell’s speech on Friday and US August PMIs on Wednesday.

On Tuesday, the USD/CHF traded with slight gains, near the critical zone of 0.8800. On the US side, Thomas Barking of the Federal Reserve (Fed) said further tightening may be necessary as investors await August PMIs on Wednesday and Jerome Powell’s speech on Friday. On the CHF side, Switzerland reported a larger than expected July Balance of Trade deficit, which appears to be putting pressure on the CHF. Apart from this, no relevant data will be released on the Swiss front for the rest of the week.

That being said, the upside potential for the dollar as measured by the US Dollar Index (DXY) is limited in a risk-friendly market environment, with the major US stock indices closing in the green on Monday. On a positive note, the Fed’s Thomas Barkin made hawkish comments, stating: “If inflation remains high and demand shows no sign that it is likely to fall, that would require tighter monetary policy.” In reaction, US Treasury yields recovered some ground, and hawkish bets could cap the dollar’s losses.

Attention now turns to the Jackson Hole Symposium, which begins on Thursday, and the S&P Global Manufacturing US figures for July, due on Wednesday. These figures are expected to show a slowdown in economic activity, but remain in expansion territory, and will help investors shape their expectations ahead of the next Federal Reserve (Fed) meeting. For now, markets remain confident that the Fed will pause in September and then bet on higher odds for a 25 basis point (bp) hike in November.

USD/CHF Levels to Watch

Analyzing the daily chart, it can be seen that the USD/CHF has a technical stance between neutral and bullish, with the bulls gradually regaining ground, but not yet in command. The Relative Strength Index (RSI) indicates positive momentum with an upward slope above its midline, while the Moving Average Convergence (MACD) features flat green bars. Elsewhere, the pair is above the 20-day SMA, but below the 100- and 200-day SMAs, suggesting that despite the recent bearish sentiment, the pair Bulls continue to resist, maintaining some momentum.

Support levels: 0.8750 (20-day SMA), 0.8730, 0.8715.

Resistance levels: 0.8800, 0.8820, 0.8850.

USD/CHF Daily Chart