USD/CHF is looking to retest the 0.9250 mark as the market is flooded with US Dollars. The coordinated effort from central banks to ramp up liquidity across the globe is likely to put downward pressure on the US Dollar.
The Federal Reserve (Fed) has opened the swap line for some major banks to gain access to the US Dollars. And some reports suggest that UBS is likely to acquire Credit Suisse that should ease the financial conditions in Switzerland. This development could l be positive for CHF, therefore downside bias remains intact for USD/CHF.
Upon breaking the closest support seen at the 0.9250 mark, the pair could retrace the Credit Suisse-led gain starting from the 0.9141 mark.
We have seen a strong downside run from the US Dollar on the first instance of the swap line during COVID, so this might be the same case again.
The ultimate destination for the pair will be 0.9100 if everything remains calm and composed.
Any upside gains are likely to remain capped between the 50-Day Moving Average (DMA) and the 21-DMA. The downward-sloping trendline starting from the March high at 0.9431 coincides with the 21-DMA, posing a strong case for the downside for USD/CHF.
The lower highs on the Relative Strength Index (RSI) signal more room for the downside.
The Swiss National Bank (SNB) rate decision is on Thursday, with the expectation of a 50 basis point (bps) hike. Despite Credit Suisse's situation, will they be able to deliver the same? This will be important to watch for USD/CHF's next direction.
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