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USD/CHF opens the week slightly higher, all eyes on US CPI

  • USD/CHF rose modestly in the quiet market environment ahead of this week’s US CPI data.
  • Disappointing US data last week weighed on the USD.
  • Markets are bracing for US inflation data due later in the week for directional clues.

On Monday, the USD/CHF traded largely neutral around 0.8970 with some gains. That said, the pair remains weak, following last week’s US data that fueled dovish bets on the Federal Reserve (Fed), causing markets to dump the USD. There will be no major event on Monday and markets are bracing for US inflation data later in the week.

US markets are now keenly watching the release of the Consumer Price Index (CPI) for June. The data will play a crucial role in determining whether the resurgence of inflation is slowing or whether the softer readings in April and May were transitory. The headline CPI for June is forecast to decelerate to 3.1% year-on-year, down from 3.3% in May, marking the third consecutive month of slowing growth. Moreover, Fed Chair Powell will deliver his Semi-Annual Monetary Policy Report to Congress this week on Tuesday, which could also shake up the USD dynamics.

On the Swiss side, no major events are expected this week, suggesting that the pair’s movement will be mostly driven by USD dynamics. Financial markets see over 50% chance of a third interest rate cut by the Swiss National Bank (SNB) in September. Likewise, the odds of a cut by the Fed in September have risen to around 80% according to the CME’s FedWatch tool.

USD/CHF Technical Analysis

The technical outlook remains somewhat negative in the near term. The pair snapped the six-day winning streak and has now posted losses for three consecutive sessions as of last Friday. Moreover, the Moving Average Convergence/Divergence (MACD) and Relative Strength Index (RSI) indicators continue to lose momentum.

The pair’s movement now centers on whether buyers will defend the 20-day simple moving average (SMA) at 0.8950. The 100-day SMA, which is located at 0.8990, is now the immediate resistance level.

USD/CHF daily chart

Source: Fx Street

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