- USD / CHF falls below 0.9200 as long dollar positions disappear after better-than-expected CPI fails to stimulate new aggressive line bets from the Fed
Amid what appears to be a huge exit from long dollar positions after the latest US inflation report failed to fuel aggressive new bets from the Fed, the USD/CHF it has tumbled from 0.9250 to below 0.9200 in recent trading. On its way down, the pair has broken below a key uptrend that had been supporting price action so far in 2022, its 50-day moving average at 0.9215 and its 21-day moving average at 0.9196. That means the door is open for a retest of the latest weekly lows at 0.9180 and a test of the 200-day moving average at 0.9160. At current levels at 0.9180, USD / CHF is trading down about 0.5% on the day, having reversed a full percentage lower from peaks near 0.9280 on Tuesday.
The loss of the dollar’s bullish momentum, which had seen it rise from near 0.9100 in early 2022 to this week’s highs near 0.9280, began after Fed Chairman Jerome Powell failed to stimulate new bets on aggressive line from the Fed in the wake of his testimony on Tuesday. Although the Fed chairman, speaking at his congressional renomination hearing, endorsed the idea of multiple increases in 2022 and a start of quantitative tightening, his tone did not deviate much from the December Fed meeting or the Minutes. Traders apparently took this as a green light to profit on bullish USD positions for a long time and despite Wednesday’s headline CPI showing inflation pressures reaching their highest level since June 1982 at 7.0% in December, the latest inflation report seems to have been interpreted in the same way
Looking at the DXY from a technical perspective, with the index now breaking below key support at the 95.50 area, the current pullback has some room to run. The next significant support area is at the 94.50 area. A drop to these types of levels suggests that USD / CHF could return to a test of the Q4 2021 lows of 0.9100. This would be a very attractive level for longer-term USD bulls who are betting that the aggressive Fed will ultimately push US yields and the US dollar higher to reload long positions.
Technical levels
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