USDCHF tumbles to moving average support | Forexlive

The USDCHF has tumbled lower as focus shifts to the US debt market. The 2 year yield is now down 20 basis points on the day at 3.936%. The 10 year yield is down -13.3 basis point to 3.440%. Regional banks are getting hammered. The S&P regional bank ETF (KRE) is trading down $2.71 or -6.58% at $38.75. That’s the lowest level since October 2020.

Looking at the USDCHF, the downside was helped by resistance at the highs today.

Looking at the hourly chart, the high price today stall right near the 38.2% retracement of the move down from the March 28 high. That level came in at 0.89928. The high price reached 0.8994 before rotating modestly to the downside. Not being able to get above the 38.2% retracement is indicative of a normal correction in what has been a more bearish trend. Buyers started to lean back to the downside.

In the early New York session, after another try at the 38.2% retracement, selling restarted after the high price reached 0.8991 just below that 38.2% retracement level. Two tries at the 38.2% and two times sellers leaned. That was the start of the fall.

With JOLTs coming out weaker and regional banks getting hit, the sellers have now pushed with more momentum to the downside. The price moved below a swing area between 0.8953 and 0.8959, and is now down testing the 100 hour moving average at 0.8939. The 200 hour moving average is at 0.89254. The low price on the fall reached 0.89332 between the two moving average levels.

So far there is a stall against moving average levels, but the shift to the downside has traders nervous. In addition to the regional banks getting hit, the NASDAQ index is now down -1.36%. The S&P index is down -1.53%, and the Dow industrial average is down -1.47%.

The Federal Reserve meets tomorrow and banking concerns could keep the Fed more cautious and lead to a more dovish tightening. The Fed is still expected to raise rates by 25 basis points, but the odds are down to 82% from close to 100% yesterday all)

Recall at their last meeting, Credit Suisse was the banking issue at the time, but the Fed went ahead with their 25 basis point hike. Now going into this meeting, First Republic was taken over by J.P. Morgan over the weekend, and now regional banks are under pressure.

WSJ Timiraus yesterday wrote:

Until now the Fed has been looking for clear signs of a slowdown in easing inflation to justify a pause. However after this week the calculations could flip. That is officials could need to see signs of stronger-than-expected demand and inflation to keep hiking.

That sentiment will be what the market will be looking for tomorrow. If so, there could be more downside for the US dollar.

CLOSE RISK for sellers in the USDCHF: Watch 0.8959 to 0.8966 (high from yesterday and near earlier low today). Stay below keeps the sellers in play.

KEY Target: Get below 0.8925 200 hour MA and stay below.