USD/CHF oscillates in a range below 50-day SMA, focus remains on FOMC meeting minutes

• USD/CHF remains confined in a familiar trading range held over the past three weeks or so.
• The subdued USD price action acts as a headwind for the major amid looming recession risks.
• The downside seems limited as traders keenly await the release of the FOMC meeting minutes.

The USD/CHF pair continues with its struggle to gain any meaningful traction on Wednesday and oscillates in a narrow band below the 50-day Simple Moving Average (SMA) through the Asian session. Spot prices currently trade around the 0.8965-0.8970 area and remain confined in a familiar range held over the past three weeks or so.

The uncertainty over the Federal Reserve's (Fed) rate hike is holding back the US Dollar (USD) bulls from placing aggressive bets and acting as a headwind for the USD/CHF pair. It is worth recalling that the US central bank signalled in June that interest rates may still need to rise as much as 50 bps by the end of this year. Furthermore, Fed Chair Jerome Powell's said last week that the central bank doesn't see rate cuts happening any time soon and is going to wait until it is confident that inflation is moving down to the 2% medium-term target. That said, the softer US PCE Price Index released on Friday, along with Monday's weaker US ISM PMI, raises questions over how much headroom the Fed has to continue tightening its monetary policy.

Hence, the market focus will remain glued to the release of the June FOMC meeting minutes, due later during the US session this Wednesday. Investors will closely scrutinize the minutes for clues about the Fed's policy outlook, which will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the USD/CHF pair. In the meantime, growing acceptance that the Fed will hike rates by 25 bps at its upcoming policy meeting on July 25-26 acts as a tailwind for the USD and lends some support to the major. That said, worries about economic headwinds from rapidly rising borrowing costs benefit the safe-haven Swiss Franc (CHF) and should cap any meaningful upside for the pair.

From a technical perspective, the range-bound price action points might be categorized as a bearish consolidation phase against the backdrop of the recent decline from the vicinity of mid-0.9100s, or the May monthly swing high. Furthermore, the lack of any buying interest and repeated failures to move back above the 50-day SMA suggests that the path of least resistance for the USD/CHF pair is to the downside. That said, a sustained strength back above the 0.9000 psychological mark will negate the positive outlook and pave the way for some meaningful appreciating move.

Technical levels to watch