- USD/CHF is testing the 0.8400 level, a key psychological support, following the release of weaker-than-anticipated US CPI figures for April.
- The US Dollar Index (DXY) has retreated to approximately 101.30, facing downward pressure from easing inflation data and diminishing optimism surrounding international trade.
- The Swiss Franc is maintaining a strong position against most of its major counterparts, bolstered by a risk-averse market environment.
The USD/CHF pair is currently retracing towards the crucial 0.8400 support level during Tuesday’s North American trading session. The US Dollar (USD) has encountered selling pressure in the wake of the latest United States (US) Consumer Price Index (CPI) report for April. The data indicated a more moderate pace of inflation growth than previously projected, falling short of market consensus. Specifically, the US Bureau of Labor Statistics (BLS) reported that the headline CPI increased by 2.3% on a year-over-year basis in April, a decrease from the 2.4% recorded in March and below the anticipated 2.4%. The core CPI, which excludes the more volatile food and energy sectors, held steady at 2.8%, aligning with median forecasts from economists.
The US Dollar Index (DXY), a measure of the USD’s value against a basket of six major currencies, has corrected to around 101.30, moving away from the monthly high of 102.00 observed on Monday. Market participants have scaled back expectations for dovish policy adjustments by the Federal Reserve at its July meeting. According to the CME FedWatch Tool, there is now a 61.4% probability that interest rates will remain unchanged within the current target range of 4.25%-4.50%. Despite this recalibration of expectations, broader concerns regarding a potential slowdown in the US economy, coupled with persistent uncertainties surrounding US-China trade relations, have continued to weigh on the Greenback’s performance. Furthermore, recent geopolitical tensions have added to the cautious sentiment surrounding the US dollar.
Concurrently, the Swiss Franc (CHF) is trading higher against the majority of its major peers, with the exception of the Australian and New Zealand Dollars. The Franc is benefiting from its traditional safe-haven appeal amidst prevailing global economic uncertainties. The USD/CHF pair is finding support near the horizontal level established by the September 6 low of 0.8375, which previously acted as a significant resistance point.
Technical Analysis
The USD/CHF pair is currently hovering near the critical support level of 0.8400, facing challenges in regaining upward momentum. The pair has managed to climb above the 20-day Exponential Moving Average (EMA), which is presently trading around 0.8326. This development could potentially signal a strengthening bullish trend, provided that the upward movement is sustained. The 14-day Relative Strength Index (RSI) has rebounded to the 60.00 level, indicating a build-up of positive momentum. However, a confirmed breakout above this level would be necessary to validate a sustained rally.
Key resistance levels to watch include the psychological barrier of 0.8500, followed by the April 10 high of 0.8580 and the April 8 high of 0.8611. On the downside, a decisive break below the 0.8375 level could expose the May 7 low of 0.8186, followed by deeper support in the vicinity of the April 11 low of 0.8100 and the April 21 low of 0.8040.
With traders adopting a cautious stance ahead of further US economic data releases and guidance from the Federal Reserve, the USD/CHF pair remains in a fragile state of recovery. Its trajectory is closely tied to shifts in risk sentiment and broader global macroeconomic indicators. Investors are also closely watching upcoming speeches from Fed officials for further clues on the central bank’s monetary policy outlook.
