Daily Market Recap – USDCHF Evolution will depend on the Fed's tapering outlook

The

USDCHF has been moving without a clear trend for several weeks. The

dollar has been on a rollercoaster ride in recent weeks due to

uncertainty about the timing of the Fed's tapering.

Investor

began the summer anticipating an announcement of a reduction in the

pace of Fed asset purchases at the end of the year, but hawkish comment

from some Fed members led investors to move that forecast to September

or October.

However,

disappointing economic data in recent weeks, including the latest U.S.

jobs report released earlier this month, has put a damper on that

scenario, with investors once again seemingly anticipating a tapering

announcement at the end of the year.

Give

the Fed's reliance on macroeconomic data, particularly inflation and

employment, upcoming US releases should continue to influence the

exchange rate. The next big market event is the FOMC's decision on the

Fed's monetary policy on September 22.

A

announcement in favor of a reduction in the pace of asset purchases

would be a first step by the Fed towards normalizing its monetary

policy, which should allow the dollar to outperform in the foreign

exchange market especially in the current context where the prospects

for tapering are uncertain. Conversely, the absence of an announcement

would put pressure on the dollar and in turn allow the USDCHF to correct

further.

From

a technical perspective, the outlook for the USDCHF will depend on

whether the exchange rate breaks out of the symmetrical triangle it has

been oscillating in since early summer.

A

breakout from the top would signal a bullish reversal in the USDCHF.

The high of the year at 0.9473 would be the first target and would

probably be reached if the Fed announced a reduction in its asset

purchases at the end of the month.

Conversely,

a breakout from the bottom of the triangle would signal a continuation

of the downtrend we have been experiencing since early spring. The first

support to watch would be the May/June low at 0.89 and would probably

be reached if the Fed does not announce tapering at the end of the month

or at its October meeting.

 (Chart Source: Tradingview 12.09.2021)

For

now, traders should pay attention to the price action in the run-up to

the 20-day moving average as it would signal potential short-term

direction in the USDCHF. As it stands, it would seem like the rate

should continue to trade sideways thus traders may consider targeting

the 0.919 and 0.913 levels.

Support & Resistance Levels:

R3       0.9473

R2       0.9342

R1       0.9262

S1        0.9134

S2        0.9000

S3        0.8926

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.