USD/CHF: Trading the Swiss CPI

The  Swiss CPI, also known as inflation, measures the change in the price of goods and services charged to consumers. The indicator is released monthly, and has the potential to be a market-mover. A reading that exceeds the market forecast  is bullish for the Swiss franc.

Here are all the details, and 5 possible outcomes for USD/CHF.

Published on Thursday at  8:15 GMT.

Indicator Background

The CPI is scrutinized carefully by investors and currency traders,  since if inflation is on the rise, there is the possibility that the  central bank may intervene and raise interest rates. Also, readings close to zero  are an indication of  weak  economic activity.    

The  February CPI reading came in at -0.4%, the fourth consecutive negative reading. The markets are predicting better news in March, with a forecast of a 0.2% rise. Will the index rebound and cross into positive territory this month?

Sentiments and levels

USD/CHF has been choppy, as the pair continues to vacillate in both directions. Although the US economy has been showing stronger signs of growth,  while  the Swiss economy is having trouble,  the franc  has enjoyed a strong 2012 so far against the dollar.    Thus, the overall sentiment is neutral on USD/CHF towards this release.

Technical levels, from top to bottom: 0.9306, 0.9250, 0.9204,  0.9120, 0.9050 and 0.8924.

5 Scenarios

1. Within expectations:-0.1% to 0.5%: In this scenario, USD/CHF could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
2. Above expectations: 0.6% to 0.9%: A reading above expectations would be an indication  of greater inflation,  and could  push the pair  below one  support level.
3. Well above expectations: Above 0.9%: An unexpectedly sharp rise in inflation would push USD/CHF downwards, andtwo or more support levels could fall.
4. Below expectations: -0.5% to -0.2%: A reading in negative territory could push the pair  upwards, with one resistance level at risk.
5. Well below expectations: Below -0.5%: Such a reading would be bearish for the franc, and USD/CHF could break two  or more resistance levels.

For more on USD/CHF, see the  USD/CHF forecast.