USD/CHF Price Analysis: Rebounds from 0.8600 amid cautious market mood

• USD/CHF climbs to near 0.8600 as US Dollar recovers amid dismal market mood.
• Investors see first rate-cut from the Fed in May now against prior expectations for March.
• The Fed is expected to maintain status-quo for fourth straight time.

The USD/CHF pair discovers buying interest near the round-level support of 0.8600. The Swiss Franc pair bounces as investors rush for safe-haven assets amid volatility ahead of the Federal Reserve (Fed) monetary policy and deepening Middle East tensions.

S&P500 futures remains subdued in the European session, which indicates that investors have sidelined ahead of the Fed policy outcome. The US Dollar Index (DXY) jumps to near the crucial resistance of 103.70. 10-year US Treasury yields have dropped to near 4.10%.

Investors see the Fed keeping interest rates unchanged in the range of 5.25-5.50% for the fourth time in a row. Meanwhile, expectations for rate-cuts by the Fed have shifted to May’s monetary policy meeting from March as policymakers have been warning about the consequences of premature rate-reduction decision that could uplift core price pressures and dampen efforts yet made in bringing them down to near 3.9%.

USD/CHF struggles to advance above the 38.2% Fibonacci retracement (plotted from 3 October 2023 high at 0.9244 to 28 December 2023 low at 0.8333) at 0.8680. The 20-period Exponential Moving Average (EMA) near 0.8620 is providing support to the US Dollar bulls.

The 14-period Relative Strength Index (RSI) has shifted into 40.00-60.00 range from the bearish range of 20.00-40.00. Fresh buying momentum would emerge if the asset will shift into the bullish range of 60.00-80.00.

Going forward, a decisive break above intraday high of 0.8652 would drive the asset towards the round-level resistance of 0.8700 and January 23 high of 0.8728.

In an alternate scenario, a downside move below the psychological support of 0.8500 will expose the asset to January 5 low at 0.8455, followed by 27 December 2023 low at 0.8408.

USD/CHF daily chart