MAs Keeping USD/CHF Steady Bullish Despite Softer PCE Price Index
USD/CHF was declining for many months starting in November, reversing at approximately 1.0150s and dropping to 0.8550s by July, however it has been retracing upward since then and the price has gone over 0.88, where resistance on the daily chart is found. This zone was resistance before for this forex pair in July, but it now appears to have turned into support.
Furthermore, on the H4 chart above, moving averages are functioning as resistance indicators, keeping USD/CHF bullish. In fact, all moving averages have been taking turns in providing support for this pair and pushing the lows higher, which is a strong sign of the bullish trend.
The bond market has been helping the USD as US Treasuries keep surging higher, which attracts demand for US Dollars since they offer higher yields. Besides that, the FED is still open for one more rate hike, while the Swiss National Bank has already stopped, keeping interest rates steady.
Last week we saw some weak numbers from the US PCE price index inflation, which is the FED’s preferred measure of inflation. But markets brushed it off and USD/CHF continued to move higher. On Friday we saw a reversal at the 50 SMA (yellow) after finding support at this moving average again and a bounce from there, so we are looking to buy retraces to the MAs on this pair.
US August PCE Report Highlights
- August core PCE +3.9% y/y vs +3.9% expected
- Prior was +4.2% (revised to +4.3%)
- Core PCE +0.1% m/m vs +0.2% expected
- Prior m/m +0.2%
- Headline inflation PCE +3.5% y/y vs +3.5% expected (Prior +3.4%)
Deflator +0.4% m/m vs +0.5% expected (prior was +0.2%)
The inflation numbers are on the low side of expectations and that should take the pressure of bonds, while weighing on the US dollar. Moreover, it’s the first reading below 4% on PCE inflation in two years.
Consumer spending and income for August:
- Personal income +0.4% vs +0.4% expected. Prior month +0.2%
- Personal spending +0.4% vs +0.4% expected. Prior month +0.8% (revised to +0.9%)
- Real personal spending +0.1% vs 0.2% prior
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