USD/CHF pulls away from 2-week highs, steadies near parity

After failing to break above the critical parity mark earlier in the day, the USD/CHF pair dropped to 0.9980 but gained traction in the NA session and advanced to its highest level in two weeks at 1.0013. With the trading action turning subdued in the last couple of hours, the pair is moving sideways a little above parity, looking to post small daily gains.

The selling pressure surrounding the euro intensified today after European Central Bank (ECB) President Draghi opened the door for further rate cuts while speaking at the ECB Forum. Both the EUR/CHF and the EUR/USD pairs turned south and posted losses in the day to make it difficult for the USD/CHF pair to make a decisive move in either direction.

Draghi's comments also provided a boost to stock markets and kept the demand away from safer CHF. On the other hand, ahead of tomorrow's FOMC meeting, the greenback struggled to preserve its strength amid the possibility of the Fed adopting a dovish tone and signalling a rate cut to keep the pair's gains limited. The US Dollar Index, which rose to its highest level since the first week of June earlier in the day, retreated from its highs and was last seen adding only 0.1% on the day at 97.63. 

Previewing the Fed event, “Expectations are much lower for a cut this week, with around an 18% chance. Our US economists recently changed their Fed call and expect 3 cuts of 25bps each at the July, September and December meetings. They also lowered their 2019 growth forecast by 40bps to 1.9%. So all eyes on Wednesday,” Deutsche Bank analysts said.

Technical levels to watch for