USD/CHF Price Forecast: Tumbles to near 0.8440 as Fed large rate cut bets swell

• USD/CHF witnesses a sharp sell-off near 0.8440 as traders raise bets toward the Fed's sizable rate cuts.
• The US Retail Sales are expected to have risen by 0.2%, slower than 1% in July.
• USD/CHF sees more downside toward 0.8300.

The USD/CHF pair falls sharply to near 0.8440 in Monday's European session. The Swiss Franc asset tumbles as market speculation for the Federal Reserve (Fed) reducing interest rates by 50 basis points (bps) to 4.75%-5.50% in its monetary policy meeting on Wednesday has strengthened.

The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 bps has increased to 59% from 30% a week ago. A swift increase in Fed dovish bets has weighed heavily on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, slumps to near 100.70.

Before the Fed policy meeting, investors will focus on the United States (US) Retail Sales data for August, which will be published on Tuesday. Economists estimate the Retail Sales data to have grown at a slower pace of 0.2% from July's print of 1%.

Meanwhile, the Swiss Franc will be influenced by market speculation for the Swiss National Bank (SNB)'s interest rate path. The SNB is expected to cut interest rates again in its late September monetary policy as inflationary pressures continue to decline.

USD/CHF declines toward the horizontal support plotted from 28 December 2023 low of 0.8333 on a daily timeframe. The near-term and broader-term outlooks of the Swiss Franc asset remain bearish as all short-to-long-term Exponential Moving Averages (EMAs) are declining.

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, suggesting that a strong bearish momentum is intact.

More downside would appear if the asset breaks below the round-level support of 0.8400, which would drag the major towards the 28 December 2023 low of 0.8333 and round-level support of 0.8300.

On the flip side, a recovery move above the weekly high near 0.8540 will drive the asset toward the round-level resistance of 0.8600, followed by the August 20 high of 0.8632.

USD/CHF daily chart