Dollar ends week on a strong note after hawkish Fed talk

After a series of separate speeches from US Federal Reserve officials this past week, the dollar continued to rebound and rally after the previous week’s dramatic nosedive. Fed speakers this past week seemed unanimous in their relative hawkishness, hinting that further Fed rate hikes could well be impending, as well as attempting to downplay the previous week’s FOMC statement. That statement was widely seen as surprisingly dovish due to its significant lowering of expectations for US rate hikes this year.

As a result of this past week’s comparatively hawkish Fed talk and boosted rate hike expectations, the US dollar surged across the board, strengthening against all other major currencies, while dollar-denominated commodities like gold dropped precipitously.

For USD/CHF, which can often be seen as a close gauge of overall dollar strength and weakness, this past week’s dollar rally was manifested as a sharp rebound off key support around the 0.9650 level. This bounce from support closely matches the rebound from the same price area back in early-to-mid February. This support is currently also reinforced by a major uptrend support line that extends back to the mid-2015 lows around 0.9070. Even further supporting the USD/CHF rebound from the 0.9650 level has been the 61.8% Fibonacci retracement of the bullish run from August to November of last year.

This very strong confluence of support in conjunction with a more hawkish Fed has helped result in the current USD/CHF rally, which has begun to lift the currency pair out of its previously oversold technical conditions. With further dollar momentum off the current rebound, USD/CHF should once again target the closely-watched parity level (1.0000) followed by key resistance at 1.0100. To the downside, any reversal of the current rebound would need to break down below the noted 0.9650 support confluence before the short-term outlook could become bearish once again. In that event, the next major downside support area is at the key 0.9500 level.