Quick Look:
- USD/CHF climbed 0.15% to 0.8830 after two sessions of losses.
- June PCE Price Index dipped to 2.5% YoY; core PCE rose to 2.6% YoY.
- Mild disinflation and economic growth suggest a steady Fed policy.
- USD/CHF below key SMAs; continues a four-week losing streak.
In Friday’s trading session, the USD/CHF currency pair finally saw some positive movement, closing 0.15% higher at approximately 0.8830. This minor rally follows two sessions of losses, relieving traders facing consistent declines. The uptick in USD/CHF was set against the backdrop of mixed signals from the latest Personal Consumption Expenditures (PCE) figures released by the United States. These figures play a pivotal role in gauging the inflation landscape and thus influence the monetary policy decisions by the Federal Reserve.
Dissecting the PCE Data
The US Bureau of Economic Analysis reported that the PCE Price Index, which measures inflation based on changes in personal consumption, slightly decreased to 2.5% year-on-year in June, down from 2.6% in May. This dip met market expectations, providing some insights into the inflationary trends in the US economy. On a month-to-month basis, the PCE Price Index saw a modest rise of 0.1% after remaining flat in May. Interestingly, the core PCE, which excludes food and energy prices, rose by 2.6% year-on-year, surpassing the anticipated 2.5%. These mixed results offer a nuanced view of inflation, indicating resilience and mild economic disinflation.
Fed’s Dovish Stance Holds Steady
From a broader perspective, robust economic growth and gentle disinflation suggest that the Federal Reserve might not aggressively cut interest rates, contrary to prevailing market sentiment. Fed Funds futures are currently pricing in nearly three rate cuts amounting to over 60 basis points by December 2024, with a total expected easing of 136 basis points over the next year. This presents a scenario where there might be room for an upward revision of the Fed funds rate expectations. Such a revision could bolster the USD and Treasury yields, leading to upward movements in the USD/CHF pair.
Technical Analysis: A Bearish Outlook
Despite the recent uptick, the technical outlook for USD/CHF remains predominantly bearish. The pair has concluded a 0.70% losing week, marking its fourth consecutive week of losses and accumulating a total decline of 1.50% since late June. This continued downtrend is underscored by the pair’s position below the 20, 100, and 200-day Simple Moving Averages (SMA), with technical indicators maintaining a hostile trajectory.
Key Support and Resistance Levels
Regarding technical levels, the support zones remain steadfast at 0.8750 and 0.8730. These levels serve as crucial benchmarks that, if breached, could indicate further downward pressure. On the flip side, the resistance levels are pegged at 0.8800, 0.8830, and 0.8850. These resistance points suggest potential areas where the pair might encounter selling pressure but also hint at the possibility of an upswing if these levels are surpassed.
Market Sentiment and Future Projections
Ongoing economic data releases and their implications for Fed policy will likely shape market sentiment. While the current PCE figures have provided mixed results, they underscore the inflation landscape’s complexity and the challenges policymakers face. Traders will keep a close eye on future data to gauge the likelihood of any shifts in the Fed’s stance, which will influence the USD/CHF dynamics.
In conclusion, the USD/CHF pair has experienced a slight reprieve from its downward spiral. However, the bearish sentiment persists. The mixed signals from the PCE data highlight the nuanced nature of the current economic environment. Traders should stay vigilant and adaptable to new information as it unfolds. The interplay between financial indicators and monetary policy will play a crucial role. It will determine the future trajectory of the USD/CHF pair.
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