USDCHF is moving in Ascending channel and market has reached higher low area of the channel
USD/CHF Challenges as US Dollar Declines Amid Lower Yields
The USD/CHF pair is experiencing a tough time as the US Dollar declines, largely due to falling yields. Let’s dive into the factors affecting this currency pair and what might be ahead.
US PMI Data and Fed Rate Cut Speculations
The recent strong US PMI data has sparked speculation about the Federal Reserve delaying its anticipated rate cuts. This development supports the Greenback, providing some resistance against a further decline. The US Composite PMI for June surpassed expectations, rising to 54.6 from May’s reading of 54.5, marking the highest level since April 2022. The Manufacturing PMI also saw an increase, hitting 51.7 from a previous 51.3, and the Services PMI rose to 55.1 from 54.8 in May. These figures beat consensus estimates and point towards a robust economic environment.
USDCHF has broken Ascending channel in downside
With these strong indicators, the odds of a Fed rate cut in September have diminished. The CME FedWatch Tool shows investors pricing in nearly 65.9% odds of a Fed rate cut in September, down from 70.2% a week earlier. This shift in expectations has lent some support to the US Dollar, despite the broader decline.
Swiss Franc’s Struggles with SNB Rate Cuts
On the other side of the pair, the Swiss Franc is facing its own set of challenges. The Swiss National Bank (SNB) has implemented a rate cut, reducing rates from 1.50% to 1.25%. This move, the second rate cut of the year, has weighed heavily on the Swiss Franc.
Adding to the pressure, SNB Chairman Thomas Jordan has mentioned the significant strengthening of the CHF in recent weeks. He stated that the central bank is prepared to intervene in the FX market if necessary. This stance indicates the SNB’s concern over the strong Franc and its impact on the economy, which in turn has affected the USD/CHF pair.
Impact of Treasury Yields on the USD
The US Dollar’s decline can also be attributed to the falling yields on US Treasury bonds. The 2-year and 10-year yields have dropped to 4.73% and 4.25%, respectively. Lower yields generally make the Dollar less attractive to investors, contributing to its current weakness.
Despite this, the downside for the US Dollar might be limited. The strong PMI data suggests a resilient US economy, which could delay the Federal Reserve’s decision to cut interest rates. This potential delay supports the Greenback, providing some relief amidst the broader decline.
Looking Ahead: Key Factors to Watch
Upcoming Economic Data
Traders should keep an eye on the upcoming ZEW Survey Expectations, which will be published by the Centre for European Economic Research. This survey will provide insights into business and employment conditions in Switzerland, potentially influencing the CHF.
Fed’s Rate Decision
The Federal Reserve’s next moves will be crucial. If the strong economic data continues, the Fed might delay rate cuts, supporting the US Dollar. On the other hand, if economic conditions worsen, a rate cut could become more likely, potentially weakening the Dollar further.
SNB’s Stance
The Swiss National Bank’s actions will also be significant. Any further rate cuts or interventions in the FX market could impact the Swiss Franc and the USD/CHF pair. Traders should monitor statements from SNB officials and any signs of further policy changes.
USDCHF is moving in Descending channel and market has reached lower high area of the channel
Summary
The USD/CHF pair is currently navigating a complex landscape influenced by multiple factors. Strong US PMI data has provided some support for the Dollar, while the Swiss Franc struggles with the impact of SNB rate cuts and potential interventions. Falling US Treasury yields have also played a role in the Dollar’s decline. Looking ahead, upcoming economic data and central bank decisions will be key in determining the direction of this currency pair. Traders should stay informed and watch for any developments that could impact the USD/CHF dynamics.
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