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  • USD/CHF built on the overnight bounce from the vicinity of a descending channel support.
  • The set-up remains tilted in favour of bearish trades amid hops for more US fiscal stimulus.
  • The attempted recovery move runs the risk of fizzling out quickly ahead of the 0.8900 mark.

The USD/CHF pair gained some positive traction on the last day of the week and moved away from multi-year lows, around the 0.8820 region touched in the previous session. Oversold conditions on short-term charts assisted the pair to find some support near the lower boundary of over two-week-old descending trend-channel.

A modest US dollar short-covering bounce was seen as one of the key factors that extended some support to the USD/CHF pair. However, a softer tone surrounding the equity markets underpinned the safe-haven Swiss franc and capped gains for the major, with bulls struggling to extend the momentum further beyond mid-0.8800s.

Meanwhile, the formation of a downward sloping channel points to a well-established short-term bearish trend. Adding to this, the USD/CHF pair’s inability to capitalize on the attempted recovery further suggests that the recent downward trajectory might still be far from being over and warrants caution for bullish traders.

Hence, any subsequent positive move might still be seen as a selling opportunity and runs the risk of fizzling out near the trend-channel resistance, currently around the 0.8875-80 region. Hopes for additional US fiscal stimulus might continue to weigh on the greenback and further add credence to the negative outlook.

That said, a sustained breakthrough the channel resistance might prompt some technical buying and push the USD/CHF pair back towards the key 0.9000 psychological mark. The 0.8900 round-figure mark and the 0.8945 region might act as intermediate resistance levels.

On the flip side, the 0.8825-20 region now seems to have emerged as immediate support and is closely followed by the trend-channel support, currently near the 0.8800 mark. Failure to defend the mentioned levels will be seen as a fresh trigger for bearish trades and turn the USD/CHF pair vulnerable to prolong its recent bearish trend.

USD/CHF 4-hourly chart

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Technical levels to watch