- US Annual CPI in May rises to highest level since February 2012.
- US Dollar Index stays directionless on the day ahead of the FOMC meeting.
- A choppy trading action is seen in Wall Street.
The USD/CHF’s price action continues to be driven by the greenback valuation on Tuesday as investors are eagerly waiting for tomorrow’s FOMC meeting. As of writing, the pair is trading at 0.9845, 15 pips above its daily low, and is still down around 10 pips on the day.
According to the data released by the US Bureau of Labor Statistics earlier in the NA session, the annual core-CPI, which doesn’t include the volatile food and fuel prices, rose to 2.2% in May from 2.1% in April to match the experts’ estimates. The rising inflation is seen as a factor that would encourage the Fed to announce an interest rate hike tomorrow. Furthermore, the annual CPI rose to 2.8% for the first time in more than a year.
Meanwhile, major equity indexes in the United States are also staying relatively calm on Tuesday with the Dow Jones Industrial Average and the S&P 500 making small moves near their opening levels.
There won’t be any other macroeconomic data releases from the United States and the pair is likely to extend its sideways trade.
Although a rate hike seems to be already priced in, the Fed’s tone and an updated dot diagram could trigger sharp reactions from the markets. ING analysts expect the Fed to announce two more rate hikes in the second half of the year and if that materializes, we could see the US Dollar Index try to retake the 94 mark.
Technical outlook
0.9800 (psychological level/100-WMA) now aligns as the first technical support ahead of 0.9770 (Apr. 24 low) and 0.9710 (Apr. 29 low). On the upside, with a daily break above 0.9910 (Jun. 1 high), the pair could extend its gains toward critical 1.0000 (psychological level/parity) and 1.0055 (May 10 high).
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