USDCHF returns inside the big range as the short positioning in the USD unwinds

The US Dollar has been under strong selling pressure for a few months and eventually became one of the most crowded trades. When you get at such overstretched levels, as soon as conditions change, the repricing in expectations can lead to notable corrections.

In the last few weeks, the positive news on the trade front started to boost the greenback as the market begun to unwind those crowded dollar shorts amid a more hawkish repricing in rate cuts expectations.

At the peak of the trade war fears, the market went to price in as far as five rate cuts by the end of 2025, and now following the US-China news, we are down to just two rate cuts (which was the Fed's base case in December 2024).

We should see further gains for the greenback as the market might even start to doubt the need for two rate cuts, but for that, stronger economic data or more hawkish Fed comments might be needed.

On the daily chart, we can see the big range between the 0.8350 support and the 0.9250 resistance. The pair broke below the support during the April's risk-off flows but has now bounced back inside the range. We can see that we have a major trendline defining the bearish trend and from a risk management perspective, the sellers will have a better risk to reward setup around the trendline to position for further downside. The buyers, on the other hand, will want to see the price breaking higher to start targeting the 0.9250 resistance next.

On the 4 hour chart, we are seeing a pullback after the spike triggered by the US-China news on Monday. The buyers will likely pile in around the 0.8330-0.8380 price area to position for a rally into the major trendline. The sellers, on the other hand, will look for a break lower to extend the pullback into the upward trendline around the 0.8260 level.