In the latest trading session, the USD/CHF pair managed to inch higher to 0.8830 after experiencing losses in the previous two sessions. This slight improvement in the pair came amidst fluctuating Personal Consumption Expenditures (PCE) figures released by the United States. The slight upward movement provided the bears with some relief after a period of consistent declines.
The US inflation figures reflected in the Personal Consumption Expenditures (PCE) Price Index saw a marginal decrease to 2.5% on a year-on-year basis in June from 2.6% in May. This data, reported by the US Bureau of Economic Analysis, met market expectations. On a monthly basis, the PCE Price Index showed a 0.1% increase, following no change in May. The core measure of the index came in higher than expected, rising by 2.6% year-on-year, compared to the expected 2.5%.
Looking at the overall economic scenario in the US, the combination of strong growth and mild disinflation suggests that the Federal Reserve may not be keen on aggressive rate cuts, contrary to market sentiment. Current market expectations for Fed funds rate changes show nearly three cuts of over 60 basis points by December 2024, totaling an easing of 136 basis points over the next year. This indicates potential room for upward revisions in Fed funds rate projections, which could boost the USD and Treasury yields and lead to upward movements in the USD/CHF pair.
From a technical analysis standpoint, the outlook for USD/CHF remains bearish, with the pair closing the week with a 0.70% loss, marking its fourth consecutive losing week and a total loss of 1.50% since late June. The pair continues to trade below the 20, 100, and 200-day Simple Moving Averages (SMA), with indicators showing a negative trend. Support levels for the pair are seen at 0.8750 and 0.8730, while resistance levels are indicated at 0.8800, 0.8830, and 0.8850, suggesting a potential upward movement in the pair.
In conclusion, the USD/CHF pair saw a slight improvement in Friday’s trading session after experiencing losses in the previous two sessions. The mixed PCE figures released by the US, showing a slight decrease in inflation, contributed to the upward movement in the pair. However, the overall economic scenario in the US indicates that the Federal Reserve may not be aggressive in cutting funds rates, contrary to market expectations. From a technical perspective, the USD/CHF pair remains bearish, with potential resistance levels indicating a possible upward movement in the pair. This suggests a complex and challenging environment for the USD, with the potential for fluctuations in the near future.
