Cracks further as risk-on mood solidifies

• USD/CHF has stretched its downside to near 0.8800 amid an intense sell-off in the USD Index.
• US headline inflation is expected to soften further amid a sheer decline in gasoline prices while core inflation could remain sticky.
• USD/CHF has dropped perpendicularly to near May’s low around 0.8820.

The USD/CHF pair has extended its downside to near 0.8800 in the European session as market sentiment is extremely cheerful. The Swiss Franc asset has faced an intense sell-off following negative cues from the US Dollar Index (DXY).

S&P500 futures have added decent gains in London, portraying further strength in the risk-taking ability of the market participants. The USD Index has found intermediate support near 101.70 but is insufficient to be recognized as a bullish reversal.

Meanwhile, investors are awaiting the United States Consumer Price Index (CPI) for further guidance. Headline inflation is expected to soften further amid a sheer decline in gasoline prices while core inflation could remain sticky amid higher labor costs.

USD/CHF has dropped perpendicularly to near May’s low around 0.8820 on a four-hour scale. Momentum has remained extremely solid in the recent downfall. The 20-period Exponential Moving Average (EMA) at 0.8890 is far from the Swiss Franc prices, which stems chances of a mean-reversion move

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, indicating sheer strength in the downside momentum.

A further breakdown below the intraday low at 0.8810 would expose the asset to 07 January 2021 low at 0.8774 and 06 January 2021 low at 0.8758.

 In an alternate scenario, a recovery move above April 26 low at 0.8852 would drive the asset toward the round-level resistance at 0.8900 followed by June 30 low at 0.8935.

USD/CHF four-hour chart