The USD/CHF currency pair has seen continued buying for the second consecutive day, poised to test three-week highs in early European trading on Wednesday. The current price is likely to climb above the 0.7900 threshold, strengthening its upward trend fueled by a robust US dollar.
Ongoing geopolitical uncertainty and expectations of a hawkish stance from the US Federal Reserve due to inflation worries are bolstering recent gains in the USD index, which tracks the US dollar against a range of currencies, reaching a six-week peak. However, buyers appear somewhat hesitant, perhaps waiting for the FOMC minutes to be released before making further moves.
Looking at the technical side, the Moving Average Convergence Divergence (MACD) histogram has turned slightly positive, suggesting a potentially favorable outlook. Yet, the spot prices linger below the 200-day exponential moving average, with the relative strength index (RSI) hovering around 58, indicating only cautious upward momentum in a generally constrained environment.
Therefore, a further rise above the 50% Fibonacci retracement level from the decline between March and May might encounter resistance around the 0.7915-0.7920 zone, near the tight overhead cluster beginning at the 61.8% Fibonacci level at 0.7936. Subsequently, the 200-day EMA at approximately 0.7956 and the 78.6% retracement at 0.7984 may serve as additional hurdles, especially if the rally continues to expand.
If the trend reverses, initial support is found at the 50.0% retracement near 0.7902, followed by the 38.2% level at 0.7868, with the lower boundary at 23.6% Fibonacci. A deeper pullback might look for strength around the 0.7827 and 0.7759 levels.
