- USD/CHF wins as US retail sales support an aggressive Fed position.
- The expectations that the Fed cuts rates in September decrease, the divergence of the Central Bank supports the strength of the USD/CHF.
- USD/CHF points to more profits as the bassist impulse fades above 0.8000
The US dollar (USD) is strengthening against the Swiss Franco (CHF) as the US optimistic economic data and the aggressive comments of the Federal Reserve (FED) support the demand for US yields.
Thursday’s retail sales data reflected an increase in consumer spending by June, standing at 0.6%, above the expected increase of 0.1%.
The upward surprise in spending, despite uncertainty about tariffs and high interest rates, has provided a ray of hope for the US economy.
As the Federal Reserve continues to express concern about the possible impact of tariffs on inflation, these data, combined with a strong labor market, reflect a resilient economy.
However, as the deadline of August tariffs approaches, the downward risks remain. The highest tariffs about imports to the US are still a great concern for investors and policy responsible. An increase in these taxes is expected to increase costs for producers, increasing the possibility that these costs move to consumers.
The expectations that the Fed cuts rates in September decrease, the divergence of the Central Bank supports the strength of the USD/CHF
Although the differentials of interest rates are largely discounted, the improvement in the feeling of risk has also delayed the expectations of a rate cut in September.
According to the Fedwatch of the CME tool, the probability of a rate cut of 25 basic points in September is now 52.7%, compared to 65.4% of this last week. Meanwhile, the probability that the rates remain at the current levels at the same meeting has increased to 46.0%, rising from 29.7%.
The comments of the Governor of the Fed, Adriana Kugler, on Thursday reinforced the aggressive narrative, saying that monetary policy should remain restrictive for “some time.” The main objective for most Fed members is to ensure that inflation returns to the objective of 2%, maintaining pressures on the prices contained.
USD/CHF points to more profits as the bassist impulse fades above 0.8000
The USD/ChF daily chart is currently showing signs of a short -term bullish reversal after a sustained bearish trend.
The price action has recently broken above the simple mobile average (SMA) of 20 days at 0.7995, recovering above the psychological level of 0.8000 and the level of fibonacci setback of 23.6% of the fall from May to July at 0.8015.
This movement is supported by a relative force index (RSI) that has been strengthened, rising above the 50 -year threshold, indicating a change in the impulse from bassist to neutral.
USD/CHF daily graphics
The following immediate resistance is at the Fibonacci recoil level of 38.2% about 0.8103, which can act as a short -term objective for buyers. If this level is exceeded, a greater rise to the 50% and 61.8% backward levels in 0.8174 and 0.8246, respectively, becomes more plausible.
In the lower part, the support is now seen in the previous resistance zone around 0.7995, with a stronger support at 0.7950. A sustained movement below these levels would invalidate the current upward configuration. In general, the structure of the graph suggests a possible continuation to the in the short term, provided that the torque maintains the support above the range of 0.7995–0.7950.
US interest rates – Frequently asked questions
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
