The USDCHF is currently facing a technical challenge as it tests an important support area between 0.7986 and 0.7994. If it drops below this range, the price could fall toward 0.79197, with a significant target at the 100-bar moving average on the 4-hour chart, currently around 0.7975. A further decline might lead to a deeper correction to the value area low at 0.79197. On the resistance side, Friday’s rally hit a strong zone between 0.8038 and 0.8058. For a significant upward movement, the price must surpass the 200-bar moving average and go above the 38.2% retracement level from the May peak at 0.8102. If it fails to clear these levels, it indicates that buyers haven’t taken control from sellers.

Support And Resistance Levels

Key support levels are 0.7986 to 0.7995, the 100-hour moving average at 0.7970, and swing lows at 0.79197. Resistance zones are located between 0.80388 and 0.80628 and around the swing area at 0.8117. Keeping a close eye on these crucial levels is essential. The current test at the 0.7986 support level is vital for derivative traders. A significant break below this zone could trigger stop-loss orders and create an opportunity for bearish positions, like buying puts. The major downside target near 0.79197 would then become more likely. However, the fundamental picture complicates a purely bearish outlook due to the Swiss National Bank’s recent actions. The central bank surprised everyone by lowering its key interest rate to 1.25% in June, a move that typically weakens its currency. This policy makes a sustained drop in the pair less likely, highlighting the importance of current support.

Fundamental Picture

In contrast, the U.S. Federal Reserve continues its higher interest rate policy, with just one rate cut expected in 2024. This growing difference in policies between the two central banks gives the dollar a strong advantage over the franc. We think this makes buying on dips an attractive strategy for long-term investors. For options traders, the mix of bearish technicals and bullish fundamentals creates a unique opportunity. Selling cash-secured puts below the crucial 0.7986 support level could either earn premium if that support holds or allow for the purchase of the pair at a better price. Implied volatility may rise if these levels are broken, making this a key moment to get positioned. Recent economic data reinforces this divergence. Switzerland’s inflation remains low at 1.4% in May, giving its policymakers plenty of room for further easing. Meanwhile, U.S. inflation, while slowing down, is still high enough to keep its monetary authority cautious about cutting rates too quickly. Looking back at 2024, the pair saw a significant rally from January to May before entering this corrective phase. Historically, strong trends often resume after consolidation or after pulling back to key levels. Therefore, we view this test of the lower value area not as a breakdown but as a potential reload zone for bullish derivative positions. Create your live VT Markets account and start trading now.

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