The USD/CHF pair rebounded strongly, edging above the key hurdle of 0.9050 during the North American trading hours on Tuesday (1/28) after a two-week correction near 0.8965. The Swiss Franc pair strengthened as the US Dollar (USD) continued its upward journey amid a nervous market environment.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, surged near 108.00. Investors rushed to the US Dollar as global technology stocks slumped on the assumption that China's DeepSeek's low-cost Artificial Intelligence (AI) model will narrow the technology gap between China and the United States (US).

Meanwhile, investors have been supporting the US Dollar against the Swiss Franc (CHF) amid expectations that the Federal Reserve (Fed) will announce a pause in its current policy easing cycle in its policy announcement on Wednesday. Conversely, the Swiss National Bank (SNB) could push its lending rate into negative territory to avoid the risk of inflation escalating beyond the central bank's 0%-2% range. This would widen the policy divergence between the Fed and the SNB.

In the Fed's monetary policy announcement, investors will look for cues on how long the central bank will keep interest rates steady.

USD/CHF is on track to re-establish its 15-month high around 0.9200. The Swiss franc pair's outlook remains strong as the 20-week Exponential Moving Average (EMA) near 0.8900 is trending up.

The 14-week Relative Strength Index (RSI) is oscillating in a bullish range of 60.00-80.00, indicating strong upside momentum.

For a fresh rise towards the 0.9300 round resistance level and the March 16, 2023 high of 0.9342, the asset needs to break significantly above the October 2023 high of 0.9244.

On the other hand, a downside move below the psychological support of 0.9000 would drag the asset towards the November 22 high of 0.8958, followed by the December 16 low of 0.8900.(AL)

Source: FXstreet