The USDCHF has gone up, thanks to a strong U.S. dollar. It has exceeded the 38.2% retracement from its June high, moving past the key level of 0.8002 and is now trading around 0.8021. The next goal is the 50% retracement level at 0.8043, which sits within a swing area from 0.8039 to 0.8055 that has been in place since mid-April. This area will test buyers looking to continue the breakout.

Technical Analysis And Market Sentiment

By surpassing the recent consolidation range ceiling of 0.7994 to 0.8002, the old resistance now acts as near-term support. Staying above this level keeps the bullish trend going. If the price drops below, it could indicate a failed breakout and bring prices back into the previous range. Right now, buyers are in control, but the challenge is to maintain momentum and reach the next technical levels. With the technical floor now established above that key retracement level, we view this as more than just a temporary movement. This is driven by differing policies that traders can use to their advantage. The strength of the dollar is not happening by itself; it is supported by steady U.S. economic data. For example, the latest U.S. Consumer Price Index is at 3.3%, putting pressure on the Federal Reserve. Consequently, market expectations for a rate cut in September have dropped below 50%, a significant change from just a few weeks ago.

Policy Divergence And Strategic Positioning

In contrast, the Swiss National Bank, led by Chairman Jordan, cut rates back in March and remains cautious, especially with domestic inflation at a manageable 1.4%. This difference in monetary policy is fueling the current rally. Therefore, a straightforward long position might not be the best strategy. We think a more precise approach is needed. We are considering bull call spreads. This method allows us to define our risk while aiming for the important zone around 0.8050. For instance, we could buy a call option with a strike just above the old resistance at around 0.8000, and sell another call at the 0.8050 target. This creates a low-cost way to take advantage of the expected upward movement. This strategy benefits from the current situation: it profits if the pair continues to climb, but also protects us from a sudden drop if buyers fail to break through that mid-April swing area. Historically, big differences in policy between the Fed and other major central banks have led to long-term trends, not just quick spikes. While we recognize the technical resistance ahead, the underlying fundamentals suggest the trend is likely to continue upward. The real question for us is not *if* we should position for more upside, but how to set up the trade to profit as we move toward that 50% retracement level without risk if Powell’s next speech turns out to be more hawkish than expected. Create your live VT Markets account and start trading now.

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