USD/CHF Forecast: Bulls Emerging Ahead of US Inflation Data

• Investors expect the Federal Reserve to raise rates by 75 basis points.
• Annual inflation in the US is expected to drop from 9.1% to 8.7%.
• The price has paused at 0.95432, a critical support level.

The USD/CHF forecast remains positive as bulls emerge in the wake of US inflation data. According to traders in Fed funds futures, the Fed funds rate is expected to increase by 75 basis points again in September and will go from 2.33 percent to 3.65 percent by March.

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“We see inflation staying above the Fed’s 2% target through next year,” BlackRock Investment Institute strategists wrote in a note on Monday. “We think the Fed will keep responding to calls to tame inflation until it acknowledges how that would stall growth.”

Markets are anticipating the release on Wednesday of July’s US inflation statistics. According to Reuters’ survey of analysts, annual inflation will have decreased from 9.1 percent in June to 8.7 percent in July.

“The US dollar has been supported by the combination of stronger US economic data releases and hawkish comments from regional Fed presidents. They have encouraged market participants to push back expectations for a dovish policy pivot from Fed,” MUFG currency analysts Derek Halpenny and Lee Hardman said in a note to clients.

According to Tim Graf, head of EMEA macro strategy at State Street, high inflation along with Friday’s labor market reading may cause the market to fully price in 75 basis points of Fed rates for September.

USD/CHF key events today

Investors are awaiting the nonfarm productivity data from the United States. Nonfarm Productivity measures the annualized change in labor productivity for producing goods and services outside agriculture. Productivity and labor-related inflation are closely associated; a decline in worker productivity corresponds to an increase in their pay.

USD/CHF technical forecast: Bears need to break below 0.95432 to head lower

The 4-hour chart shows the price trading between the 0.96502 resistance and 0.95432 support levels. It has broken below the 30-SMA showing bears have taken over. However, they are currently facing strong support at 0.95432. The RSI supports bearish momentum as it trades below 50.

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If this support level holds, the bulls might come to retest resistance at 0.96502. If bears can break below the support level, we will see the price falling and retest the August 1 support at 0.94820.

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