USD/CHF Slips to 0.8855 as markets await US PCE inflation data
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The USD/CHF pair traded lower during Wednesday’s early European session, softening to around 0.8855 as the US Dollar (USD) retreated ahead of key US inflation data. The pair’s movement reflects market caution, with traders awaiting the Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve's preferred inflation gauge—later in the day.
Key drivers influencing USD/CHF
US Dollar under pressure amid profit-taking and cautious Fed signals
The USD weakened as profit-taking pushed the US Dollar Index (DXY) lower to its weekly low, reflecting subdued sentiment despite robust US economic data. Tuesday’s release of the November FOMC meeting minutes highlighted the Federal Reserve’s cautious stance on future rate cuts. While Fed officials anticipate rate reductions ahead, they emphasized a gradual approach, with the probability of a December rate cut now at 57.7%, down from 69.5% a month ago, according to CME’s FedWatch Tool.
Geopolitical developments bolster the Swiss Franc
The Swiss Franc (CHF), a traditional safe-haven currency, gained support as geopolitical risks remain in focus. Reports of Israel’s ceasefire agreement with Lebanon’s Hezbollah militants, which includes a phased withdrawal of Israeli forces from southern Lebanon, have provided a temporary reprieve. However, any signs of renewed tensions in the Middle East or escalation in other geopolitical hotspots could strengthen safe-haven flows into the CHF.
Market focus: US PCE inflation data
Traders are closely monitoring the upcoming PCE Price Index for October, a key indicator of inflation trends in the US. The data will be pivotal in shaping expectations for the Federal Reserve’s monetary policy path and will likely drive short-term volatility in USD/CHF.
Technical outlook: Key levels in focus
USD/CHF remains in a consolidation phase, with bearish sentiment gaining traction in the short term.
Support levels:
Immediate support is seen near 0.8830, followed by the recent low of 0.8800. A break below this level could signal further downside, potentially targeting 0.8770, the monthly low.
Resistance levels:
On the upside, 0.8875 serves as the first resistance level, with stronger resistance at 0.8900. A decisive break above 0.8900 could open the door for further recovery, targeting the 0.8950 region. Momentum indicators, including the Relative Strength Index (RSI), suggest a bearish bias but remain above oversold territory, leaving room for further declines without significant reversal signals.
Outlook
The USD/CHF pair is likely to remain sensitive to US inflation data and geopolitical developments. A stronger-than-expected PCE reading could reinvigorate USD demand, while weaker data might further weigh on the Greenback, benefitting the Swiss Franc.
Investors should also monitor developments in the Middle East and broader risk sentiment, as escalating geopolitical risks could enhance the CHF’s safe-haven appeal. In the near term, USD/CHF is expected to trade within the 0.8830–0.8900 range, with breakout potential contingent on the direction of US data and market sentiment.
Key drivers influencing USD/CHF
US Dollar under pressure amid profit-taking and cautious Fed signals
The USD weakened as profit-taking pushed the US Dollar Index (DXY) lower to its weekly low, reflecting subdued sentiment despite robust US economic data. Tuesday’s release of the November FOMC meeting minutes highlighted the Federal Reserve’s cautious stance on future rate cuts. While Fed officials anticipate rate reductions ahead, they emphasized a gradual approach, with the probability of a December rate cut now at 57.7%, down from 69.5% a month ago, according to CME’s FedWatch Tool.
Geopolitical developments bolster the Swiss Franc
The Swiss Franc (CHF), a traditional safe-haven currency, gained support as geopolitical risks remain in focus. Reports of Israel’s ceasefire agreement with Lebanon’s Hezbollah militants, which includes a phased withdrawal of Israeli forces from southern Lebanon, have provided a temporary reprieve. However, any signs of renewed tensions in the Middle East or escalation in other geopolitical hotspots could strengthen safe-haven flows into the CHF.
Market focus: US PCE inflation data
Traders are closely monitoring the upcoming PCE Price Index for October, a key indicator of inflation trends in the US. The data will be pivotal in shaping expectations for the Federal Reserve’s monetary policy path and will likely drive short-term volatility in USD/CHF.
Technical outlook: Key levels in focus
USD/CHF remains in a consolidation phase, with bearish sentiment gaining traction in the short term.
Support levels:
Immediate support is seen near 0.8830, followed by the recent low of 0.8800. A break below this level could signal further downside, potentially targeting 0.8770, the monthly low.
Resistance levels:
On the upside, 0.8875 serves as the first resistance level, with stronger resistance at 0.8900. A decisive break above 0.8900 could open the door for further recovery, targeting the 0.8950 region. Momentum indicators, including the Relative Strength Index (RSI), suggest a bearish bias but remain above oversold territory, leaving room for further declines without significant reversal signals.
Outlook
The USD/CHF pair is likely to remain sensitive to US inflation data and geopolitical developments. A stronger-than-expected PCE reading could reinvigorate USD demand, while weaker data might further weigh on the Greenback, benefitting the Swiss Franc.
Investors should also monitor developments in the Middle East and broader risk sentiment, as escalating geopolitical risks could enhance the CHF’s safe-haven appeal. In the near term, USD/CHF is expected to trade within the 0.8830–0.8900 range, with breakout potential contingent on the direction of US data and market sentiment.