USD/CHF: The situation has moved from the “dead point” in the issue of the US national debt

According to media reports, over the weekend, Democrats led by US President Joe Biden and Republicans led by Kevin McCarthy tentatively agreed to raise the US debt ceiling until January 2025 (now this preliminary agreement must pass through the House of Representatives and the Senate on Wednesday). It provides for limiting federal budget expenditures (outside the defense sector) in 2024 at the level of the current fiscal year. Some representatives of the Democratic and Republican parties have already expressed their disagreement with the plan, saying they will not support it on the ballot.

After agreeing on all the details, the deal must be approved by Congress by June 5 (previously by June 1) in order to avoid a US default.

If the decision is made and the level of the national debt limit is raised (by 2 years), then the US Treasury will probably issue a new large package of bonds to quickly replenish the empty treasury. Theoretically, this should provoke a decrease in their value/an increase in profitability, and as a result, a further strengthening of the dollar. However, the Fed is already ready to print, as previously reported, up to $ 800 billion, which should slightly balance the increased demand for the dollar and weaken the growth of its quotations.

At the same time, the probability of a further increase in the level of interest rates by the Fed is also growing.

In the meantime, the growth of US government bond yields and the strengthening of the dollar have stopped.

At the end of last week, the dollar received additional support from positive macro statistics. And tomorrow, market participants will pay attention to the publication (at 13:00 GMT) of house price indices in the United States and at 14:00 of the Conference Board report with data on consumer confidence (the index may adjust to 99.0 from 101.3 earlier, for the first time since June 2022, which may negatively affect the USD).

These publications are preceded by the publication at 07:00 (GMT) of the Swiss GDP report with data for the 1st quarter.

The data point to continued recovery of the Swiss economy, albeit at a relatively slow pace, and this is a positive factor for the franc.

From a technical point of view, the USD/CHF pair develops long-term downward dynamics, trading in the zone of long- and medium-term bear markets - below the key resistance levels of 0.9265, 0.9285, 0.9375, 0.9410.

A breakdown of the important short–term support level of 0.9018 will be the first signal for the resumption of short positions, and a breakdown of the support level of 0.9000 will be a confirmation.

Support levels: 0.9035, 0.9030, 0.9018, 0.9000, 0.8930, 0.8820.

Resistance levels: 0.9073, 0.9107, 0.9205, 0.9265, 0.9285, 0.9300, 0.9375, 0.9410.