USD/CHF struggles near multi-week low, bears await a break below 0.9160-55 support

• USD/CHF edged lower for the third successive day and dropped to a near three-week low on Friday.
• A modest USD weakness was seen as a key factor exerting some downward pressure on the major.
• The risk-on mood undermined the safe-haven CHF and limited losses amid the year-end thin liquidity.

The USD/CHF pair remained depressed through the first half of the European session and was last seen hovering near a three-week low, around the 0.9170-65 region.

The pair edged lower for the third successive day on Friday and prolonged this week's rejection slide from the 0.9250 resistance zone. The downtick was exclusively sponsored by a modest US dollar weakness, with bears now looking to extend the downward trajectory further below the very important 200-day SMA.

That said, a generally positive tone around the equity markets undermined the safe-haven Swiss franc and extended some support to the USD/CHF pair. The global risk sentiment remained well supported by the recent studies, indicating that Omicron infections are less likely to lead to hospitalization.

Apart from this, the Fed's hawkish outlook acted as a tailwind for the greenback and should further help limit any deeper losses for the USD/CHF pair, at least for now. It is worth recalling that the so-called dot plot indicated that the Fed could hike interest rates at least three times next year.

From a technical perspective, the ongoing slide dragged the USD/CHF pair below support marked by the lower end of a near three-week-old trading range. A subsequent fall below the 0.9160-55 support area will reaffirm the negative bias and pave the way for a further near-term depreciating move.

The divergence between the fundamental backdrop and the technical setup warrants some caution before placing aggressive directional bets. Moreover, the year-end thin liquidity conditions suggest that the USD/CHF pair is more likely to enter a consolidation phase and oscillate in a narrow band on the Christmas Eve.

Technical levels to watch