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Dollar Weakens as Fed Dovish Shift Weighs; USD/CHF Slips Below Key 0.8000 Level
Traders' Opinions
Summary:
The U.S. dollar fell sharply Wednesday as dovish comments from Fed Chair Jerome Powell fueled bets on imminent rate cuts, dragging USD/CHF below the crucial 0.8000 level while weak Swiss inflation data limited franc gains.
Sell
CLOSEDUSDCHF
End Time
0.79900
Entry Price
0.78500
TP
0.80400
SL
0.79302 -0.00028 -0.04%
118
Points
Profit
0.78500
TP
0.79782
CLOSING
0.79900
Entry Price
0.80400
SL
The U.S. dollar weakened broadly on Wednesday, with investors accelerating bets on near-term Federal Reserve rate cuts following a dovish policy outlook from Chair Jerome Powell. The greenback’s decline pushed the USD/CHF pair below the psychologically important 0.8000 level during the European session, bringing it dangerously close to Friday’s multi-month low around 0.7990.
The shift in sentiment marks a notable turn from earlier in the week when market focus was dominated by rising Sino-American trade tensions. Traders are now reorienting toward monetary policy expectations, with Powell’s latest remarks reinforcing the view that the Fed is prioritizing growth stabilization over inflation containment as the U.S. economy shows signs of losing momentum.
Speaking on Tuesday, Powell acknowledged that while inflation remains somewhat above the 2% target, the “greater risk” now lies in a cooling labor market. He suggested that the Federal Reserve is increasingly confident inflation pressures are abating and that monetary policy is already “restrictive enough.”
Market participants interpreted these comments as a strong hint that the Fed will cut its benchmark rate by 25 basis points at its late-October meeting. Futures markets are now pricing in nearly a full probability of such a move, with growing speculation that another reduction could follow in December if economic indicators continue to deteriorate.
Powell also revealed that the central bank is nearing the end of its balance sheet reduction programme—often referred to as quantitative tightening—signaling a potential pivot toward a more accommodative stance. The Fed chief noted emerging signs that liquidity in the financial system is tightening, implying that policymakers may soon pause the runoff of assets to prevent excessive strain on credit markets.
This dovish tone represents a notable shift from the cautious rhetoric seen earlier in the year and suggests that the Fed is preparing to recalibrate policy amid rising concerns over employment weakness and slowing business investment.
Across the Atlantic, the Swiss franc is seeing only modest gains despite the dollar’s weakness. That’s largely because Switzerland’s latest producer price data underscored deflationary pressures that could constrain the Swiss National Bank (SNB) from adopting an aggressively hawkish tone.
The Swiss Producer Price Index (PPI) showed factory-gate inflation contracting for the fifth consecutive month in September, dropping 0.2% after a 0.6% decline in August. The reading came as a disappointment to markets that had expected a 0.2% increase, signaling that disinflation remains entrenched in the Swiss economy.
This persistent weakness in producer prices could revive speculation that the SNB may need to reintroduce negative interest rates if the global slowdown deepens. While such a move remains unlikely in the near term, it underscores the policy dilemma facing Swiss authorities: balancing the need to support domestic prices while avoiding excessive franc appreciation that could weigh on exports.
Technical Analysis
From a technical perspective, USD/CHF is showing increasing vulnerability after breaking below key psychological support at 0.8000. The pair has been trading within a bearish flag formation, suggesting that the recent pause in the downtrend could be giving way to another leg lower.
Currently, the pair is hovering near an ascending trendline and a crucial horizontal support area. A decisive break below this confluence could trigger a 100 to 120-pip bearish extension, potentially targeting the 0.7880–0.7850 region, which aligns with prior swing lows.
Momentum indicators such as the RSI and MACD continue to point lower, reinforcing the view that sellers remain in control. On the upside, immediate resistance lies near 0.8040, followed by 0.8080; only a sustained recovery above these levels would negate the short-term bearish setup.
TRADE RECOMMENDATION
SELL USDCHF
ENTRY PRICE: 0.7990
STOP LOSS: 0.8040
TAKE PROFIT: 0.7850
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