USD/CHF remains depressed near multi-year lows, around mid-0.9100s ahead of FOMC

• USD/CHF witnessed some follow-through selling for the seventh straight session on Wednesday.
• The prevalent selling bias around the USD was seen as a key factor behind the ongoing downfall.
• Repositioning trade ahead of the highly anticipated FOMC decision might infuse some volatility.

The USD/CHF pair dropped to fresh multi-year lows during the early European session, albeit quickly recovered few pips thereafter and was last seen trading near mid-0.9100s.

The pair prolonged its recent bearish trajectory and continued losing ground for the seventh consecutive session on Wednesday, also marking the eighth day of a negative move in the previous nine. The downfall was exclusively sponsored by the emergence of some fresh selling around the US dollar.

The greenback remained depressed and languished near two-year lows through the first half of the trading action on Wednesday. The impasse over the next round of US fiscal stimulus measures and expectations of a dovish shift in the Fed’s policy stance contributed to the USD’s offered tone.

Worries that the US economic recovery could be grinding to a halt in the wake of the resurgence in coronavirus cases have been fueling speculations that the Fed will add more stimulus to support the economy. The FOMC is scheduled to announce its policy decision during the US session on Wednesday.

The US central bank is widely expected to keep its policy measures unchanged at the end of a two-day meeting on Wednesday and hence, the key focus will be on the accompanying rate statement. The forward guidance will help investors determine the next leg of a directional move for the buck.

Meanwhile, a modest bounce in the US Treasury bond yields might extend some support to the greenback. This coupled with some repositioning trade ahead of Wednesday’s key event risk might trigger some short-covering bounce and infuse some volatility around the USD/CHF pair.

Technical levels to watch