USD/CHF Downtrend Pauses Ahead of Crucial Inflation Reports

Friday Market Overview:

The US dollar has maintained stability following reports indicating faster-than-expected economic growth and declining inflation in the second quarter. These readings have bolstered hopes of a soft landing for the US economy, suggesting that growth will remain steady while inflation continues to decrease. However, the dollar’s gains have been limited, as broader market dynamics, including the tech stock sell-off, upcoming US elections, and reduced interest rate-driven trades, overshadow these data points. Concurrently, the dollar continues to exhibit a downward trend against the Swiss franc, driven by expectations of rate cuts, which could further encourage sellers to push the price lower.

Technical Analysis:

In the daily chart, USD/CHF has breached the support at 0.88194, continuing the downtrend initiated on April 22, 2024. Should sellers succeed in breaking this support, the next price targets are projected at 0.87911, 0.87485, and 0.87153. The persistent bearish momentum is evident with the RSI, MACD, and moving averages all indicating a downward trend.

Alternative Scenario:

If buyers manage to reclaim control and close above 0.88194, the market will shift its focus to the resistances at 0.88592 and the price ceiling at 0.89235 near the 34-period moving average. A breakout above this upper resistance would invalidate the bearish scenario and suggest a potential trend reversal.

Key Levels:

Resistance Levels:

• Resistance 2: 0.89235
• Resistance 1: 0.88592

Current Price (at the time of analysis): 0.88293

Support Levels:

• Support 1: 0.88194
• Support 2: 0.87911
• Support 3: 0.87485
• Support 4: 0.87153

Impactful Events:

Friday’s focus is on the Federal Reserve’s preferred inflation measure, which could significantly influence market expectations regarding a potential rate cut in September. The June Personal Consumption Expenditures (PCE) Price Index is expected to show a modest monthly increase of 0.1%, with an annual figure of 2.5%, aligning closely with the Fed’s 2% target. The Consumer Price Index (CPI) in June recorded its first decline in four years, reinforcing market expectations that the Fed may be poised to lower interest rates in September.

Technical Indicators:

RSI (Relative Strength Index): Bearish, indicating sustained selling pressure.

MACD (Moving Average Convergence Divergence): Bearish, reinforcing the downward trend.

Moving Averages: Bearish, reflecting the current downward momentum.

Conclusion:

The USD/CHF pair remains under pressure, testing key support levels as market participants anticipate crucial inflation data. A sustained break below 0.88194 could pave the way for further declines towards 0.87911, 0.87485, and 0.87153. Conversely, if buyers manage to close above 0.88194, the pair may test resistances at 0.88592 and 0.89235, potentially reversing the current downtrend. Friday’s PCE inflation report will be pivotal in shaping market expectations and influencing the pair’s next move.