USD/CHF Price Analysis: Eyes more gains above 0.8700 as hawkish Fed policy looks certain

• USD/CHF is gathering strength to break above the immediate resistance of 0.8700 ahead of Fed policy.
• Jerome Powell is widely expected to elevate interest rates further to 5.25-5.50%.
• USD/CHF delivered a breakout of the inventory accumulation phase.

The USD/CHF pair is facing delicate resistance near the round-level barricade of 0.8700 in the European session. The Swiss Franc asset is struggling in extending recovery ahead of the interest rate decision by the Federal Reserve (Fed), which will be announced on Wednesday.

Fed Chair Jerome Powell is widely expected to elevate interest rates further to 5.25-5.50% as core inflation more than doubled the desired rate of 2%. However, investors will keenly watch interest rate guidance to know whether interest rates have peaked for now more steam left.

The US Dollar Index (DXY) has printed a fresh intraday high above the crucial resistance of 101.40 as the Fed’s policy divergence is set to widen further with global central banks. Apart from the Fed’s policy, investors will focus on preliminary second-quarter Gross Domestic Product (GDP) data, which will release on Thursday at 12:30 GMT.

USD/CHF delivered a breakout of the inventory accumulation phase on a two-hour scale in which inventory is transferred from retail participants to institutional investors. The Swiss Franc asset also delivered a breakout of the consolidation formed in a 0.8638-0.8685 range and now testing the strength for a fresh rally.

The 20-period Exponential Moving Average (EMA) at 0.8675 is providing a cushion to the US Dollar bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has jumped into the 60.00-80.00 range, which indicates that the bullish momentum has been triggered.

Going forward, a confident break above July 24 high at 0.8700 would drive the asset towards a 20-day EMA at 0.8750 followed by July 12 high around 0.8800.

In an alternate scenario, a breakdown below July 18 low at 0.8555 would expose the asset to a fresh eight-year low near round-level support at 0.8500. A slippage below the latter would further drag the asset toward Jun 2011 low at 0.8275.

USD/CHF two-hour chart