This pair is facing challenges in finding any buying momentum, particularly since March when the banking turmoil turned the sentiment negative and sent safe havens such as the CHF higher. The turmoil resurfaced again this month and safe havens received another boost, with GOLD surging toward record highs last week while USD/CHF reversed lower after failing at the 20 SMA (gray) on the daily chart, which is acting as resistance.
In the last several days, USD/CHF has traded above and below the key level of 0.8900. Although looking at the daily chart, this pair is expected to decline further. The uncertainties surrounding the US debt ceiling crisis are also weighing on the price. Meetings between the White House officials and Republican leaders have failed to reach a conclusion, adding to the uncertainty.
The US Dollar Index (DXY) has faced resistance in its recovery above the immediate hurdle at 101.83 with investors are anxious ahead of the release of the US Consumer Price Index (CPI) data yesterday. After the report the index crashed lower, but recovered somewhat afterward. The monthly headline CPI inflation accelerated by 0.4% compared to the March rate of 0.1%. Annual headline inflation ticked lower 4.9% though, while core CPI, which excludes volatile oil and food prices also ticked down to 5.5% from the previous release of 5.6%. The yield on 10-year US Treasury bonds has slightly dipped below 3.50% after the release. So, the USD turned softer after the lower inflation which is bearish for this pair.
On the other hand, the Swiss National Bank (SNB) should slow down the pace of interest rate hikes as well due to a decline in annual CPI (April) from 2.9% to 2.6%, with the monthly inflation remaining unchanged, while the market anticipated a 0.5% increase. But chairman Jordan made some hawkish comments yesterday, saying that the policy is not restrictive enough, which should keep the buying pressure on for the CHF, and send USD/CHF lower.
SNB chairman Jordan speaking:
- Inflation is above average for price stability range
- Inflation is higher than we want
- Current monetary policy is still not restrictive enough