USD/CHF Price Forecast: Extends winning streak for eighth trading day

• USD/CHF refreshes a five-month high of around 0.8970 as the US Dollar performs strongly, with the Fed policy in focus.
• The Fed is expected to cut interest rates by 25 bps to 4.25%-4.50%.
• Investors expect the SNB to cut interest rates further as risks of inflation undershooting SNB's target have escalated.

The USD/CHF pair stretches its winning spell for the eighth trading day on Tuesday. The Swiss Franc pair posts a fresh five-month high around 0.8970 as the Swiss Franc (CHF) remains weak across the board on expectations that the Swiss National Bank (SNB) could continue loosening its monetary policy to avoid risks of inflation undershooting the central bank's target.

Last week, the SNB surprisingly reduced interest rates by 50 basis points (bps) to 0.5%, while investors expected a 25-bps interest rate reduction.

This week, investors will focus on the Q4 SNB Bulletin report, which includes the 'Monetary policy report' and the report on 'Business cycle trends'.

Meanwhile, the outperformance of the US Dollar (USD) has also strengthened the Swiss Franc pair. The US Dollar Index (DXY) climbs to near 107.00 ahead of the Federal Reserve's (Fed) interest rate decision, which will be announced on Wednesday. According to the Bloomberg survey, the Fed will cut its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% but will deliver slightly hawkish remarks on the monetary policy outlook.

USD/CHF appears confident to deliver a decisive break above the supply zone, which is plotted in a range of 0.8925-0.8950 on a daily timeframe. The upward-sloping 20-day Exponential Moving Average (EMA) near 0.8856 suggests that the trend is bullish.

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

After breaking above the intraday high of 0.8975, the asset could rise to near the psychological resistance of 0.9000 and the July 2 high of 0.9050.

In an alternate scenario, a downside move below the round-level support of 0.8700 could drag the asset toward the October 23 low of 0.8650, followed by the November low of 0.8616.

USD/CHF daily chart