USD/CHF Price Analysis: Rises to 0.8950 as Fed dials back multiple rate-cut prospects

• USD/CHF recovers further to 0.8955 as the Fed maintains a hawkish narrative on the interest rate outlook.
• Investors await the US PPI to get more cues for more guidance.
• Weak Swiss produce inflation boosts SNB’s subsequent rate-cut bets.

The USD/CHF pair edges higher to 0.8955 in Thursday’s European session. The Swiss Franc asset holds the strong recovery move of Wednesday as the US Dollar (USD) rises amid expectations that the Federal Reserve (Fed) will not reduce interest rates more than once this year.

The US Dollar Index (DXY) extends recovery to 104.80 after the Fed signaled only one rate cut this year against three anticipated when policymakers last met in March. The Fed maintained a “higher for longer” interest rate narrative despite acknowledging that soft May report is encouraging. However, Fed Chair Jerome Powell cleared that policymakers need more good inflation data for months to build confidence before considering rate cuts.

Going forward, investors will focus on the US Producer Price Index (PPI) report for May, which will be published at 12:30 GMT. The PPI report will indicate the change in prices of goods and services done at the factory gates.

Meanwhile, the Swiss Franc weakens after weak Producer and Import Prices for May. On a month-on-month basis, producer inflation unexpectedly contracted by 0.3%, while investors forecasted it to rise by 0.5%. Annual PPI contracted at a steady pace of 1.8%, which would boost expectations of subsequent rate cuts by the Swiss National Bank (SNB) in June’s policy meeting.

USD/CHF continues to take support near the 38.2% Fibonacci retracement support at 0.8885, plotted from 28 December 2023 low at 0.8333 to May 1 high at 0.9225. Earlier, the Swiss Franc asset weakened after breaking below the horizontal support marked from March 28 low near 0.9000, which has become a major resistance for the US Dollar bulls.

The major's long-term trend is uncertain as it hovers near the 200-day Exponential Moving Averages (EMAs), which trade around 0.8950.

The 14-period Relative Strength Index (RSI) shifts into the bearish range of 20.00-60.00 from the bullish range of 40.00-80.00, indicating a bearish reversal.

Going forward, more recovery above the psychological resistance of 0.9000 will drive the asset towards June 3 high at 0.9036, followed by May 28 low at 0.9086.

On the flip side, the asset would expose to March 21 low at 0.8840 and the round-level support of 0.8800 will open if the asset breaks below June 4 low of 0.8900.

USD/CHF daily chart