• USD/CHF moves higher to near 0.8850 as the US Dollar posts a fresh two-week high.
• The Fed is expected to begin reducing interest rates in September.
• USD/CHF trades in a Falling Channel chart pattern.

The USD/CHF pair climbs to near 0.8850 in Monday’s New York session. The Swiss Franc asset gains as the US Dollar (USD) rises amid uncertainty ahead of the Federal Reserve’s (Fed) interest rate decision, which will be announced on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh two-week high around 104.60. The Fed is expected to maintain a status quo for the eighth straight time as inflationary pressures is higher than the desired rate of 2%. While the Fed has made some decent progress in disinflation recently, which will force policymakers to discuss on rate cuts.

Currently, financial markets see the Fed beginning to reduce interest rates from the September meeting and following the trend one more time to November or December.

Meanwhile, the Swiss Franc will be influenced by the Consumer Price Index (CPI) data for July, which will be published later on Friday. The monthly CPI is estimated to have deflated by 0.2% after remaining unchanged in June. This will boost expectations of more rate cuts by the Swiss National Bank (SNB).

USD/CHF bounces back strongly from the lower boundary of the Falling Channel formation, on a daily timeframe, in which each pullback move is considered as selling opportunity by market participants. The 20-day Exponential Moving Average (EMA) near 0.8900 continues to act as major barricade for the US Dollar bulls.

The 14-period Relative Strength Index (RSI) attempts to return inside the 40.00-60.00 range. A bearish momentum would come to an end if the RSI manages to do the same. However, the overall trend will continue to remain bearish.

Going forward, a decisive break above the round-level resistance of 0.8900 will unlock the upside towards July 17 high at 0.8945, followed by the psychological resistance of 0.9000.

In an alternate scenario, a downside move below July 25 low at 0.8777 would expose the asset to March 8 low near 0.8730 and the round-level support of 0.8700.
 

USD/CHF daily chart

(Click on image to enlarge)

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