0.8150: Swiss Franc hits monthly lows as Fed hiking bets, risk aversion buoy US Dollar
The Swiss Franc (CHF) extends its decline against a stronger US Dollar (USD) on Wednesday, and is nearly 0.9% down in the last two days.
On Wednesday, the Swiss Franc (CHF) reached its lowest point in a month as the US Dollar (USD) strengthened, driven by increased expectations of Federal Reserve (Fed) rate hikes and risk aversion due to escalating tensions in the Middle East. The US military conducted strikes on targets in Iran, which prompted Iran to retaliate by attacking US bases in Bahrain and Jordan.
This event marked the most severe tension since the hostilities ceased in late July. Despite Fed Chairman, Kevin Warsh’s hawkish remarks at the Jackson Hole summit, most financial markets anticipate a rate hike during the Fed’s monetary policy meeting on September 16. Conversely, the Swiss National Bank (SNB) is anticipated to keep its benchmark interest rate constant at 0% throughout September and likely for the remainder of the year.
The USD/CHF pair has been on a rising trend this week, but trading near overbought levels might lead to a consolidation or bearish correction. Technical indicators show a very strong but potentially stretched upside momentum. If the USD/CHF pair surpasses the mid-August high of 0.8145, the subsequent uptrend targets include the July 30 peak at 0.8175 and the year-to-date peak at 0.8207.
A bearish reversal below 0.8145 would revisit the high near 0.8125 reached on Tuesday. In the event of further decline, the next support level would be around the August 31 low at 0.8070.
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