USD/CHF loses momentum ahead of 0.96, waits for FOMC
The USD/CHF pair extended its gains for the third straight day on Wednesday and touched its 6-day peak at 0.9593 before losing some strength. At the moment, the pair is trading at 0.9582, up 0.6%, or 55 pips on the day.
Following the NA session on Tuesday, in which the greenback found some demand from investors on robust macro data from the United States and political developments, the USD caught another buying wave when European traders hit their desks on Wednesday. The US Dollar Index rose above the 94 mark for the first time this week during the European session and lifted the pair to its daily peak. However, the index retraced its losses to turn flat on the day ahead of the FOMC statement later in the NA session.
Furthermore, the solid performance of global stock indexes helps the risk-on mood continue to dominate the markets and keep the demand for safer assets like the CHF low. On Wednesday, big corporations like Coca Cola and Ford Motors announced better-than-expected earnings reports, which could push the major equity indexes in the U.S. to fresh record highs and provide an additional boost to the pair.
Tthe Fed is going to announce the monetary policy decisions and release its statement at 18:00 GMT. Although markets don't expect any changes to the policy, the statement will be looked upon for fresh clues regarding the timing of the balance sheet reduction.
- USD can’t expect help from the Fed – Deutsche Bank
- FOMC: All eyes on announcement of balance sheet normalization - SocGen
Technical outlook
The RSI on the H4 chart is moving near the 70 handle, suggesting that the pair could struggle to edge higher before making a technical correction. A decisive break above the 0.96 handle could open the door to 0.9660 (Jul. 17 high) and 0.9700 (psychological level/Jul. 14 high). On the downside, supports could be seen at 0.9520 (daily low), 0.9440 (May 3, 2016, low) and 0.9400 (psychological level).
- USD/CHF upside should face resistance at 0.9630 – Commerzbank