USD/CHF subdued in holiday thinned trade near-0.9150 ahead of quiet data week

• USD/CHF is on Monday consolidating near the 0.9150 mark in thin-US holiday-thinned trading conditions.
• USD flows ahead of next week’s Fed meeting are likely to take centre stage this week.

USD/CHF is on Monday consolidating near the 0.9150 mark in thin-US holiday-thinned trading conditions. Looking at the pair from a technical perspective over the very short-term, USD/CHF is being supported by an uptrend that has been in play since last Friday. A break below this trend-line would reignite the prospect of a retest of recent lows in the 0.9100 area. To the upside, the presence of the 200-day moving average at 0.9165 seems to be offering resistance. A break above this area would see USD/CHF quickly run into further resistance in the form of the 21 and 50DMA either side of the 0.9200 level.

In terms of the major drivers for the pair this week; USD flows ahead of next week’s Fed meeting are likely to take centre stage as traders assess whether the surprisingly hawkish Fed will end up being a dollar positive. Most strategists remain bullish on the buck despite recent weakness which many have argued was a result of a squeeze on over-crowded long-positioning. That suggests upside risks for the pair this week, though there won’t be much by way of tier one US data for the bulls to latch onto. The only notable US data are regional Fed manufacturing surveys for January, or data that pertains to the housing market (not of interest to FX markets right now). Switzerland also doesn’t see the release of any notable data, aside from Producer Prices on Tuesday.

Elevated global inflationary pressures haven’t really fed through into Switzerland and so the market’s conviction that the SNB will indefinitely continue with its ultra-accommodative stance remains strong. For USD/CHF traders, that means the SNB remains in the market trying to prevent CHF strength. Sight deposits of domestic banks rose sharply in the week ending on January 14 to CHF 655.103, a sign that the SNB might have been active in FX markets last week. This didn’t seem to impact CHF at the time.