FX.co ★ Youe | USD/CHF

The USD/CHF pair recorded gains for a second consecutive session, trading around the 0.8200 level during the Asian session on Friday. Despite these recent advances, a prevailing bearish trend continues to dominate, as the pair's price action remains contained within a descending channel pattern. The USD/CHF continues to trade below its nine-day exponential moving average (EMA), a technical signal indicative of weak short-term momentum. Furthermore, the 14-day Relative Strength Index (RSI) remains below the 50-mark, reinforcing the ongoing bearish outlook for the pair. On the downside, if the bearish pressure persists, the USD/CHF pair could decline towards the lower boundary of the descending channel, positioned around 0.8140. A decisive break below this channel could significantly reinforce the downside momentum, exerting further downward pressure on the pair towards the area around 0.8039. This level represents the lowest point since November 2011, last touched on April 21, and would mark a critical test for the pair.

Conversely, for the USD/CHF pair to show signs of a recovery, it would first need to target the immediate resistance level provided by the nine-day EMA at 0.8219. A successful break above this level could improve short-term price momentum and potentially enable the pair to explore the area around the upper boundary of the descending channel, located around 0.8300. Beyond that, the next significant resistance is the 50-day moving average at 0.8365. The US dollar (USD) experienced a sharp decline on Wednesday, largely attributed to a series of disappointing US economic data releases for May. A particular concern was the sharp slowdown in private sector labor demand. The ADP Employment Change data revealed that the private sector added a mere 37,000 new workers, marking the lowest reading since the depths of the COVID-19 pandemic in January 2021. Adding to these concerns, the services Purchasing Managers' Index (PMI) showed an unexpected decline in activity, coupled with rising input costs within the services sector. Given that the services sector accounts for approximately two-thirds of overall economic activity in the US, these factors have significantly heightened the risk of stagflation – a concerning economic scenario characterized by slow economic growth, high unemployment, and rising prices. The combination of rising input costs and a sluggish labor market typically creates an environment conducive to stagflation, further weighing on the dollar's value.