USD/CHF Outlook: USD Roars Despite Slight Dovish Fed Minutes

USD/CHF Outlook: USD Roars Despite Slight Dovish Fed Minutes

  • Fed officials are ready for a slower rate hike pace.
  • Markets anticipate a 50bps Fed rate hike in September.
  • In the charts, bulls have paused at 0.95421.

Today’s USD/CHF outlook is bullish as markets recover from the slightly dovish Fed minutes. According to the minutes, officials were prepared to lower the rate at which interest rates were raised in response to signs that inflation was slowing.

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In the minutes of their July meeting, which were made public on Wednesday, Fed officials stated that the timing of rate increases in the future would depend on both new economic data and assessments of how the economy was adjusting to the higher rates already set.

Given recent economic statistics showing a deceleration in inflation, futures traders of contracts linked to the Fed’s policy rate saw a half-point rate hike in September as more plausible after the release of the minutes.

“Overall, the minutes read a bit dovish,” said Sean Bandazian, senior investment analyst for Cornerstone Wealth in Charlotte, North Carolina.

“There was a lot of language about slowdowns in different areas but also several mentions about how strong the labor market is. They are keenly aware that several areas of the economy are slowing. Remember that these minutes are a bit stale – they are from a meeting before the decelerated CPI and an extraordinarily strong jobs report that came in for July.”

A dovish Fed could mean a weaker dollar as risk sentiment improves in the markets.

USD/CHF key events today

Investors expect the US initial jobless claims to go up from 262K to 265K. The Philadelphia Fed Manufacturing Index is expected to rise to -5.0 from the previous -12.3. Finally, there will be a new home sales report with the value expected to come in at 4.89M from 5.12M.

USD/CHF technical outlook: Bulls looking for a breakout

USD/CHF price

Looking at the 4-hour chart, we see the price trading above the 30-SMA and the RSI trading above 50. These are signs that the trend is bullish. The price has, however, paused at 0.95421, a support-turned solid resistance level. This level has seen bears returning to try and push the price lower.

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Since bulls have strong momentum, the price will likely break above 0.95421 and retest resistance at 0.96255.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.