USD/CHF remains on the defensive with upside attempts capped below 0.8760

• The Dollar maintains its bearish bias with recovery attempts capped below 0.8760.
• Speculatioon of Fed rate cuts in March are weighing on the US Dollar.
• Weaker-than-expected Swiss CPI likely to weigh on the CHF.

The US Dollar’s mild recovery attempt seen early on Monday has found support right below the 0.8760 resistance area, which leaves the pair treading water near four-month lows.

The pair regained some ground during the Asian trading session. The market has assumed that the end of Fed’s tightening cycle, yet caution is prevailing as a string of key US employment figures will determine the chances that the bank starts cutting rates in early 2024.

Hopes of Fed cuts in March are weighing on the USD 

On Friday, Fed Chair Powell's cautious tone regarding further tightening and a weaker-than-expected US ISM manufacturing PMI strengthened the idea that the effect of high rates is starting to affect the overall economy. This boosted hopes of rate cuts in March, and sent the US Dollar lower across the board.

In Switzerland, November’s CPI has shown that inflation is cooling beyond expectations. Consumer prices grew 1.4% year-on-year, their weakest increase in two years, with the monthly inflation dropping to negative levels. This practically discards another SNB hike at their meeting in December 14, which has eased bullish pressure on the Swissie.

The technical picture shows indecision at current levels, with upside attempts capped at 0.8760 ahead of 0.8815. Support levels are 0.8660 and 0.8560.

Technical levels to watch