Tue, May 21, 2024

USD/CHF Drops to 0.9060 Amid Dismissed April PPI of 0.5%

Wibest – CHF Franc: New Swiss franc notes.

Quick Look:

  • USD faces losses against CHF, influenced by lower US yields and dismissive response to PPI data.
  • Switzerland’s economic indicators show mixed results; slight improvement in Producer and Import Prices.
  • US CPI report and Swiss Industrial Production data could impact future USD/CHF movements.

The US dollar (USD) has faced successive losses against the Swiss Franc (CHF). Thereby marking a notable downtrend during Asian trading hours on Wednesday. The currency pair dipped to a trading level of 0.9060. It reflected a bearish sentiment that was further influenced by lower US yields. Besides, a lacklustre response to domestic economic data impacted the dynamic.

US April PPI Rises to 0.5%, Swiss Import Prices Down 1.8% YOY

April’s US Producer Price Index (PPI) showed an unexpected rise at 0.5% month-on-month, against a forecast of 0.3%. This increase from the previous month’s decline of 0.1% did little to sway investor sentiment. For instance, it seemed to dismiss the implications of rising producer prices on future inflation. Core PPI, which excludes volatile items such as food and energy, also recorded a rise of 0.5%, exceeding expectations set at 0.2%.

Conversely, Switzerland’s economic indicators presented a mixed bag. The Producer and Import Prices noted a year-on-year decline of 1.8%, an improvement from the previous -2.1%. Monthly changes showed a slight increase to 0.6% from a prior 0.1%, indicating subtle shifts in the production cost landscape within the country.

USD/CHF Neutral, Key Support at 0.9005, Resistance at 0.9080

The market’s tepid reaction to the US data underscores a broader concern regarding inflationary pressures and their impact on monetary policy. Federal Reserve Chair Jerome Powell’s recent commentary highlighted a continued decline in expected inflation trends, although confidence in the disinflation outlook has diminished. Powell maintains an optimistic view on GDP growth, predicting 2% or higher rates, supported by a strong labour market.

From a technical perspective, the USD/CHF pair remains neutral immediately, with a slight bias towards further declines. Key support levels are identified at 0.9005, and the 55-day exponential moving average (EMA) is at 0.9009, suggesting a possible testing ground if bearish momentum continues. Resistance is pegged at the 55 4-hour EMA at 0.9080, with a significant retest high at 0.9223.

Upcoming: US CPI Report and Swiss Q1 Industrial Output

Investors now focus on upcoming key events, which could provide further cues for currency movements.  The US Consumer Price Index (CPI) report, scheduled for release on Wednesday, is highly anticipated for its potential impact on Federal Reserve policy. Furthermore, on Friday, Switzerland will disclose its first-quarter figures for Industrial Production year-over-year, offering insights into the industrial sector’s health and its influence on the CHF.

USD/CHF Could Rally to 1.0146 on Break Above 0.9243 Resistance

The broader price action pattern for USD/CHF is developing into a corrective pattern from a medium-term bottom of 0.8332. A decisive break above the resistance at 0.9243 could pave the way for a bullish outlook target of 1.0146. However, any movement towards this bullish scenario remains contingent on overcoming current market uncertainties and economic data outcomes.

Advisors recommend that investors and traders alike stay tuned to the upcoming economic reports and Federal Reserve communications, as these will crucially shape the future trajectory of the USD/CHF currency pair.

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