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  • Worries about US CPI volatility triggered a mild sell-off in the USD/CHF near 0.9330.
  • Since investors ignored higher US inflation, the US Treasury yield fell from 2.83%.
  • Forecasts will be influenced by retail sales data from the US this week.

The USD/CHF forecast is neutral as the pair consolidates despite the hawkish Fed’s stance and upbeat US core inflation data.

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After the market participants dismissed concerns about higher US inflation, the USD/CHF price pulled some bids higher around 0.9330 in early Asian trading. It was widely expected that US inflation would be at multi-decade highs in light of the invasion of Ukraine by Russia and the helicopter money the Federal Reserve pumped into the economy in the wake of the Covid-19 pandemic.

US CPI hits 8.5%

The US consumer price index (CPI) ended at 8.5% instead of the expected 8.4%. The government has to raise interest rates and shrink the balance sheet to contain inflation. US Treasury yields fell following the release of the US CPI. Following a three-year high of 2.83%, the 10-year US Treasury yield plunged sharply. This suggests that investors are already adjusting to higher US inflation.

Hawkish Fed

However, the dollar reversed course as US stocks fell, enabling the rally to recover successfully as money markets discounted the Fed’s hawkish stance. On Tuesday, the US 10-year Treasury bond auction yielded 2.72%, down from 1.92% a month earlier. Nevertheless, the 10-year yield is on track to test the October 2018 high of around 3.26% as inflation expectations stay relatively stable and the 10-year yield climbs above this week’s high of 2.836%.

The dollar remains elevated, and Fed officials are expected to remain hawkish. As a result, the US dollar may reach a March 2020 high near 103 if it gains 50 basis points over the next month, according to DXY. At 100.333, the price has already achieved a new cyclical high.

In her speech on Tuesday, Fed vice chair Lael Breiner emphasized the importance of containing inflation in the core commodities segment. During recent months, labor market reports have shown a decline in unemployment rates, but more needs to be done to improve participation rates.

What’s next to watch for USD/CHF forecast?

On Thursday, investors will pay attention to the US Census Bureau’s monthly retail sales report. Retail sales in the US are expected to have grown by 0.6% from the previous reading of 0.3%.

USD/CHF price technical forecast: Bulls trying to pace up

usd/chf forecast

The USD/CHF price remains locked between 20-period and 200-period SMAs on the 4-hour chart. As long as the price consolidates, we lack a clear directional bias. The 50 and 100 SMA bullish crossover may not help the buyers as the volume for the upside wave was declining.

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Any upside will face strong resistance around 0.9350 ahead of 0.9400. On the flip side, the pair may find support around 0.9275 ahead of 0.9240.

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