USD/CHF has dropped to about 0.8240 as the US Dollar weakens. This decline follows Moody’s downgrade of the US Sovereign Credit rating from Aaa to Aa1. The US Dollar has been losing ground for three consecutive days, continuing its downward trend during the European trading session. The US Dollar Index has fallen to around 99.50, its lowest point in two weeks. Uncertainty in US politics over a proposed tax-cut bill, which could increase US debt by $3 trillion to $5 trillion, has further weakened the US Dollar.

Swiss National Bank Policy

Interest is now on the Swiss National Bank (SNB) as the Swiss economic calendar is light this week. The SNB has expressed willingness to consider negative interest rates in case of global economic challenges. USD/CHF has fallen below the 20-day Exponential Moving Average (EMA) at about 0.8340, indicating a bearish short-term trend. The 14-day Relative Strength Index (RSI) is between 40.00 and 60.00, showing that volatility is low. If the pair falls below the May 7 low of 0.8186, it may reach lower support levels. However, if it rises above 0.8500, we could see a recovery towards higher resistance levels from April.

Market Sentiment and Technical Analysis

Moody’s recent downgrade of the US sovereign credit rating from Aaa to Aa1 has put significant pressure on the US Dollar. This downgrade raises concerns about America’s long-term debt, which is unsettling for the markets. As a result, USD/CHF continues to decline and is now around 0.8240, marking its third straight drop in European trading, highlighting ongoing weakness in the Dollar. Additionally, political gridlock regarding a multi-trillion-dollar tax-cut bill has added to market anxiety. The proposed bill may add $3 trillion to $5 trillion to the national debt, leading to reduced investor interest in holding US Dollars. The Dollar Index now sits at around 99.50, its lowest level in two weeks, serving as a key indicator of confidence in the currency. This downturn reveals a lack of investor enthusiasm. Meanwhile, the focus has shifted to the Swiss National Bank as Switzerland has released little economic data recently. The SNB is open to further cuts in interest rates, preparing for potential global economic issues. While immediate SNB changes may not be expected, such comments can influence market expectations. From a technical view, breaking below the 20-day EMA at 0.8340 is significant. Holding below this level may keep sellers in control. The RSI indicates neutral momentum, between 40 and 60, signaling a period of reduced activity without strong buying or selling pressure. This reflects uncertainty in the market leaning slightly bearish. The next key level to watch is the low from May 7 at 0.8186. If it is tested and breached, it would suggest further declines and could lead to testing lower demand zones not seen since early spring. However, if the pair rebounds and exceeds 0.8500, it might change market sentiment dramatically, possibly leading to increased interest in previous resistance levels seen in April. For those trading options or making strategic decisions, it’s better to focus on taking advantage of short rallies rather than attempting to chase prolonged downturns. Given the current volatility, it calls for patience and careful execution until clear direction emerges from upcoming events. Create your live VT Markets account and start trading now.

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