USD/CHF slides to near two-week low, challenges 200-DMA around 0.9175 region

• A combination of factors dragged USD/CHF to a near two-week low on Friday.
• COVID-19 jitters benefitted the safe-haven CHF and exerted some pressure.
• The prevalent USD selling bias also contributed to the ongoing corrective slide.

The USD/CHF pair dropped to a near two-week low, around the 0.9175 region during the European session, with bears now awaiting a sustained break below the very important 200-day SMA.

The pair edged lower for the second successive day on Friday and extended its pullback from the 0.9300 neighbourhood, or monthly high touched in reaction to the Fed announcement on Wednesday. Worries about the economic risks emerging from the rapid spread of the Omicron coronavirus variant continued weighing on investors' sentiment. This was evident from a generally weaker tone around the equity markets, which benefitted the Swiss franc's relative safe-haven status.

Apart from this, the prevalent US dollar selling bias added to the selling bias surrounding the USD/CHF pair and contributed to the ongoing decline. That said, the Fed's hawkish outlook acted as a tailwind for the greenback and lend some support to the pair. The Fed announced that it would double the pace of tapering to $30 billion per month. Moreover, the so-called dot plot indicated that officials expect to raise the fed funds rate at least three times next year.

The fundamental backdrop supports prospects for the emergence of some dip-buying around the USD, warranting some caution for aggressive bearish traders. This makes it prudent to wait for a strong follow-through selling below the monthly swing low support, around the 0.9165-60 area, before confirming that the USD/CHF pair has topped out. In the absence of any relevant market-moving economic releases, this will set the stage for a further near-term depreciating move.

Technical levels to watch