USD/CHF consolidates its recent slump to the lowest level since 2015, below 0.8600

• USD/CHF remains depressed near a multi-year low amid the bearish sentiment around the USD.
• Bets that the Fed will soon end its rate-hiking cycle undermine the USD and acts as a headwind.
• The fundamental backdrop seems tilted in favour of bears and supports prospects for further losses.

The USD/CHF pair enters a bearish consolidation phase and oscillates in a narrow trading band around its lowest level since January 2015 touched during the Asian session on Friday. Spot prices remain below the 0.8600 mark and seem vulnerable to prolonging a six-day-old bearish trend.

The US Dollar (USD) pauses its recent sharp fall witnessed over the past week or so, to a 15-month low, in the wake of a modest uptick in the US Treasury bond yields and turns out to be a key factor lending some support to the USD/CHF pair. That said, firming expectations that the Federal Reserve (Fed) will hike interest rates only one more time this year could act as a headwind for the US bond yields and the USD, which, in turn, is holding back bulls from placing aggressive bets around the major.

In fact, market participants now seem convinced that the US central bank is close to ending its fastest monetary policy tightening cycle since the 1980s. The bets were lifted by the US CPI report released on Wednesday, which showed a further moderation in consumer prices. Adding to this, the US Producer Price Index (PPI) recorded the smallest yearly increase in nearly three years in June. This could allow the Fed to soften its hawkish stance, which might continue to weigh on the Greenback.

Apart from this, a modest pullback in the US equity futures could benefit the safe-haven Swiss Franc (CHF) and further contribute to capping any meaningful upside for the USD/CHF pair. Nevertheless, spot prices remain on track to end in the red for the second successive week. Market participants now look to the release of the Preliminary Michigan US Consumer Sentiment Index, which might influence the USD price dynamic and provide some impetus to the pair on the last day of the week.

Technical levels to watch