USD/CHF bears prod seven-week-old support near 0.8920, SNB, Fed Powell eyed

USD/CHF remains pressured near 0.8925, poking the weekly low amid early Thursday after printing the first daily loss in four the previous day. In doing so, the Swiss Franc (CHF) pair struggles to cheer the US Dollar weakness ahead of the all-important Swiss National Bank (SNB) Interest Rate Decision.

Hawkish statements from Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual testimony to the US House Financial Services Committee failed to impress the US Dollar bulls as the greenback printed the first daily loss in four after the key event. The reason could be linked to the absence of any fresh comments, as well as contrasting statements from other Fed Officials. That said, the US Dollar Index (DXY) dropped the most in a week the previous day, poking the 102.00 level by the press time.

Talking about Powell’s testimony, Fed’s Powell advocated for raising interest rates somewhat further by year-end. The policymaker also exemplified decelerating a car near the destination while saying, "It may make sense to move rates higher, at a more moderate pace." Even so, the Fed’s Powell mentioned, "We are very far from our inflation target." That said, most of the statements from Fed’s Powell were replicas of the last week’s FOMC statement and hence failed to impress the USD buyers.

Meanwhile, comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and triggered the US Dollar weakness as he said that the decision last week was a close call for him. The central bank has to “do more sniffing” before another rate hike, Fed’s Goolsbee added.

Apart from these catalysts, hopes of China stimulus and the US-China tension also weighed on the USD/CHF prices, due to its risk-barometer status. The People’s Bank of China’s (PBoC) rate cut joins the Chinese Ministry of Finance's announcement of tax incentives to suggest more stimulus from the world’s biggest commodity user. However, fears of the global economic slowdown and escalating US-China tension, after Beijing hits back at US President Joe Biden’s criticism of its Chinese counterpart, put a floor under the US Dollar and the USD/CHF price.

Against this backdrop, Wall Street closed in the negative zone for the third consecutive day while the US Treasury bond yields remained intact after a volatile day. It should be noted that the S&P500 Futures remain directionless in Asia amid holidays in China and Hong Kong.

Moving on, the SNB’s Interest Rate Decision will be the key as markets expect 25 basis points (bps) of a rate hike but the interest rate futures recently suggest a jump in the odds favoring a 50 bps rate lift. Apart from the SNB rate announcement, Chairman Jordan’s press conference and the second round of Fed Chair Powell’s testimony, this time before the Senate Banking Committee, will also be important to watch for clear directions.

Also read: SNB Preview: Two scenarios and their implications for EUR/CHF – Credit Suisse

Technical analysis

With its clear U-turn from an eight-day-old descending resistance line and the 50-DMA, respectively near 0.8965 and 0.8980 in that order, the USD/CHF pair is likely to break the immediate support line stretched from early May, to 0.8920 at the latest. It’s worth noting that the previous weekly low of around 0.8900 may also check the bears before giving them control.