• USDCHF extends losses towards the vicinity of 0.8800 amid a subdued US Dollar.
• The US Fed is expected to uphold elevated policy rates to tackle persistent inflation.
• Swiss Franc gained support from favorable Swiss Trade Balance figures on Tuesday.

For the second straight day, the USD/CHF pair is declining; on Wednesday, during the Asian session, it was trading below 0.8800. A lower US Dollar (USD), which is impacted by low US Treasury yields, is the cause of the USD/CHF pair’s decline. This decline can be a reflection of how the market is feeling about future rate cuts that the Federal Reserve (Fed) may implement.

To address ongoing concerns about inflation, the US Federal Reserve is anticipated to keep policy rates higher for an extended length of time. This is incredibly likely given the recent robust US statistics on producer and consumer prices.

The likelihood of a Fed rate cut has significantly dropped to 8.5% for March and 30.7% for May, according to the CME FedWatch Tool. Instead, with a 54.3% chance, market expectations are now tilting toward the start of easing in June.

 

The rates on US Treasury bonds, specifically the 2-year and 10-year, are currently 4.59% and 4.26%, respectively, while the US Dollar Index (DXY) is still falling and is very close to 103.90. Investors are looking forward to learning more about the Federal Reserve’s interest rate policy when the Federal Open Market Committee (FOMC) minutes are released later in the North American session.

Positive Swiss Trade Balance data on Tuesday helped to push the value of the Swiss Franc (CHF) higher. According to the data, January’s trade surplus was 4,738 million, more than December’s 1,271 million. In addition, the employment level for the fourth quarter of 2023 will be revealed on Friday by the Swiss Federal Statistical Office.

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USD/CHF: TECHNICAL LEVELS TO WATCH

Conclusion

The interplay between Fed rate expectations and market dynamics in the USD/CHF pair presents a complex puzzle for forex enthusiasts to decipher. The scenario underscores the importance of keeping abreast of central bank policies, economic indicators, and global events to make informed trading decisions. As the year progresses and market conditions evolve, staying flexible with trading strategies and continually reassessing market sentiment will be key for those looking to capitalize on the movements of USD/CHF.