USD/CHF Outlook: Less Hawkish Fed to Support Risk Sentiment

• Fed minutes showed officials were mostly confident they could advance in smaller steps.
• The dollar index fell 5.1% in November, on pace for its worst monthly performance in 12 years.
• The US economy shrank for a fifth consecutive month in November.

Today’s USD/CHF outlook is bearish as the dollar weakens. On Thursday, investors made bets on riskier assets as the expectation of a slower pace of interest rate increases from the Federal Reserve led to a general decline in the value of the US dollar.

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The much-anticipated summary of the Fed meeting on November 1-2 revealed officials were mostly confident they could now advance in smaller steps.

The Fed increased its benchmark rate this month by three-quarters of a percentage point for the fourth consecutive month to control the stiflingly high inflation. However, slightly lower-than-anticipated US consumer pricing data has raised optimism for a slower pace of increases. As a result of these expectations, the dollar index fell 5.1% in November, on pace for its worst monthly performance in 12 years.

The minutes also revealed a growing discussion within the Fed about the risks that rapid policy tightening would bring to financial stability and economic growth. Policymakers also admitted that rates still needed to climb as there had yet to be much visible progress on inflation.

According to data released on Wednesday, the US economy shrank for a fifth consecutive month in November. Higher interest rates also impacted demand, with a gauge of new orders falling to their lowest level in 2-1/2 years.

USD/CHF key events today

Today might be a quiet trading day as the US observes Thanksgiving Day. Switzerland will not be releasing any significant economic data.

USD/CHF technical outlook: Support emerges at the 0.9400

Looking at the 4-hour chart, we see the price trading well below the 30-SMA and the RSI in the oversold region, showing bears are in control. The bears took over after a bullish move failed to go beyond the 0.9600 resistance level. There was a pause at the 30-SMA before the bearish move continued to the 0.9400 support.

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The RSI is currently in the oversold region, which might allow bulls to return. Bulls will also return if the 0.9400 level holds as support. However, if the price pushes below, it might reach the next support at 0.9301.

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