Today marks a crucial juncture for the USDCHF currency pair, with both economies unveiling their latest inflation figures. The day commenced with Switzerland’s inflation release, revealing a year-over-year figure that fell short of expectations, registering at 1.3% instead of the anticipated 1.7%. Similarly, month-over-month inflation disappointed, coming in at 0.2% rather than the expected 0.6%, though it did mark an improvement from the previous month’s 0%.
This dovish report weakened the Swiss Franc, pushing the currency pair meaningfully higher. As the day progresses, anticipation remains high as the spotlight shifts to the United States. Forecasts predict a decline in yearly inflation from 3.4% to 2.9%, with core inflation following suit, expected to decrease from 3.9% to 3.7%. The stage is set for continued volatility, ensuring an engaging day ahead in the currency markets.
Technical
On the 4H chart, a clear uptrend has emerged following the breakout from a descending channel pattern. The 25-SMA (green line) trades above the 50-SMA (blue line) and 100-SMA (orange line), confirming the bullish presence. However, volumes are declining, signalling that the uptrend could be running out of steam.
Resistance at 0.8808 could be the level to watch in the upcoming session, as a daily close above this level could signal that the bullish run in the early session has backing. Resistance at 0.8826 could then become important, as it could be the next hurdle to the bullish momentum going forward. With the RSI ticking into overbought conditions, a pullback may be initiated here.
However, if the session closes below the 0.8808 level, the bullish run may be overextended. In this case, a pullback toward 0.8791 and 0.8770 could become likely. The 25-SMA offers further support near 0.8745 and could provide a challenging hurdle for the bears to cross to initiate a sustainable pullback. If they are successful, the currency pair could trickle down toward the 50-SMA near 0.8701.
Summary
While the US inflation could be the main driver for the day, the Swiss Franc provided some movement in the early session as its inflation data disappointed. The movement around 0.8808 could be pivotal in the upcoming session to determine whether the recent bullish run is becoming overextended.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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