The USD/CHF currency pair is once again approaching its 50-day moving average (DMA), a crucial level where buyers and sellers are vying for control. While technical indicators hint at potential downside risks, recent price action suggests a possible rebound. Traders are closely watching to see whether the pair will break higher or face renewed selling pressure.

USD/CHF Retests 50DMA After Recent Decline

After last week’s drop, USD/CHF is now retesting the 50DMA from below. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest bearish momentum, but a morning star pattern—often seen at bullish reversal points—indicates a possible shift in direction. If the pair breaks above 0.9050, it could climb toward 0.9155, while failure to hold could lead to a drop toward 0.8920.

Market Overview

With a quiet economic calendar in both the U.S. and Switzerland this week, traders are focusing more on technical levels rather than fundamental drivers like interest rate differentials. This puts additional weight on price action at key resistance and support zones.

Key Technical Signals

Last week, a three-candle evening star pattern initially pushed USD/CHF lower, breaking through key support levels. However, the decline stalled before reaching the January 27 low of 0.8966. A subsequent rebound has brought the pair back to the 50DMA, forming a morning star pattern, which could signal an upcoming bullish reversal.

Despite this, RSI continues to show lower lows, and MACD remains in a bearish trend, which suggests that downward pressure is still present. As a result, traders may remain cautious about making directional bets until a clearer signal emerges.

Trading Scenarios

• Bearish Setup: If USD/CHF fails to break and hold above the 50DMA, traders may consider short positions below this level, with stops placed above 0.9050. Potential downside targets include 0.8966 and the support range between 0.8920 and 0.8895.
• Bullish Setup: A decisive move above the 50DMA could support long positions above 0.9050, with stops placed below for risk management. If this scenario plays out, the pair could retest the February 12 high of 0.9155, with a further extension toward 0.9200.

USD/CHF and Market Correlations

Unlike previous trends, USD/CHF has recently shown weaker correlations with U.S. Treasury yields and the U.S.-Swiss yield differential. However, its correlation with the euro against the dollar remains relatively intact, albeit slightly weakened.

Given the absence of major economic events in the near term, price action will likely be the primary driver of USD/CHF movement. Traders should closely monitor the 50DMA for potential breakout or rejection signals to guide their next moves.