USD/CHF Price Forecast: Retreats from 0.8700

• USD/CHF falls back from 0.8700, following the US Dollar's retreat.
• This week, the US Dollar will be guided by a slew of US economic data.
• Swiss Franc bulls will strengthen after a Bullish Flag breakout.

The USD/CHF pair falls sharply after testing the round-level resistance of 0.8700 in Monday's European session, the highest level seen in more than two months. The Swiss Franc pair traced the US Dollar's (USD) move, which retreated after revisiting an almost three-month high, with the US Dollar Index (DXY) falling from 104.60.

The US Dollar struggles to extend its upside move as investors turn cautious with an array of United States (US) economic data in the pipeline. This week, market participants will focus on the Q3 Gross Domestic Product (GDP), the Personal Consumption Expenditure Price Index (PCE) for September, and the Nonfarm Payrolls (NFP) for October, which will influence market speculation for Federal Reserve (Fed) interest rate path.

Signs of significant job demand and economic growth will weaken the Fed dovish bets for the December meeting as traders have priced in a 25 basis points (bps) interest rate cut in November. On the contrary, soft numbers would do the opposite. Meanwhile, a majority of Fed officials are confident that the disinflation trend is intact towards the bank's target of 2%.

In the Swiss region, market participants expect the Swiss National Bank (SNB) to continue reducing interest rates further as inflationary pressures remain within striking distance of 2% for a longer period.

USD/CHF forms a Bullish Flag chart pattern on a daily timeframe. The above-mentioned pattern reflects an inventory adjustment process that follows the ongoing trend after the completion, which in this case is up.

Upward-sloping 20-day Exponential Moving Average (EMA) near 0.8613, suggests a strong uptrend.

The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, indicating a strong upside momentum.

More upside would appear if the Swiss Franc pair breaks above the intraday high of 0.8700. A breakout move will drive the asset towards the August 15 high of 0.8750 and the July 25 low of 0.8777.

In an alternate scenario, a downside move below the September 12 low of 0.8550 will drag the asset toward the psychological support of 0.8500, followed by the October 2 low of 0.8450.

USD/CHF daily chart