swiss francs

CHF/USD Futures Outlook Remain Negative Below 1.075, Eying FOMC

  • Wednesday marks the fourth consecutive day that the CHF/USD pair has seen strong bearish momentum.
  • The dollar surged near two-year highs in response to the Fed’s hawkish outlook.
  • CHF safe haven boosted by softer risk tone ahead of FOMC minutes.

In the first half of the European session, the CHF/USD futures (MSF1) exchange rate maintained a strong asking tone and was last seen trading a few pips just above the weekly low.

The pair continued its downfall for the fourth straight day as selling interest in the US Dollar persisted following its recent rebound from levels below 1.0690. The CHF/USD pair has been under pressure by expectations that the Fed will take more aggressive action to combat stubbornly high inflation, which has pushed the dollar to a near two-year high.

Fed’s rate hike plan

Markets expected the Fed to raise 100 basis points over the next two meetings. Furthermore, Fed Chair Lael Brainard said Tuesday that the Federal Reserve could begin reducing its balance sheet rapidly after its May meeting. As a result, US Treasury yields rose to multi-year highs, and the US dollar strengthened.

Risk sentiment

In spite of this, cautious sentiment, evident in softer equity markets, has provided a safe haven for the Swiss franc and discouraged bears from betting on the new CHF/USD orders. Moreover, despite fading hopes for a diplomatic solution to end the war in Ukraine and the prospect of fresh sanctions against Russia for its alleged war crimes, the market sentiment remains volatile.

What’s next to watch?

However, the bias appears to favor bearish traders and support further losses in the short run. Yet traders may prefer to sit on the sidelines until the Fed policy meeting minutes are released later in the US meeting. In addition, US bond yields will influence the CHF/USD pair and add some momentum.

CHF/USD futures daily open interest

CHF/USD futures daily open interest
CHF/USD futures daily open interest

The CHF/USD pair fell yesterday while the daily open interest went up. It indicates that the pair has a strong bearish bias.

CHF/USD futures technical analysis: Broken trendline and bearish crossover

CHF/USD futures 4-hour chart
CHF/USD futures 4-hour chart

The CHF/USD futures maintain a bearish momentum as the price remains well below the key moving averages on the 4-hour chart. Moreover, the 20 and 200 SMAs are going to create a bearish crossover which will further confirm the bearish trend.

The ascending trendline has also been broken. The price is now attempting to retest the broken trendline, and most likely, the pair will find subsequent selling that will drive the prices below the recent swing low of 1.0690.