USD/CHF fades spike above 0.97 as DXY turns negative

The USD/CHF pair surged to a fresh monthly high at 0.9705 in the early NA session after the inflation data from the U.S. allowed the greenback to gather strength against its rivals. However, the pair quickly returned to pre-data levels and is now trading at 0.9665, gaining 0.22% on the day.

The data released by the U.S. Bureau of Labor Statistics on Thursday showed that the consumer inflation measured by the CPI rose 0.4% and 1.9% on a monthly and yearly basis respectively, both figures surpassing market expectations. The CME Group FedWatch's probability of a 25 bps rate hike in December advanced to 51.% from 42% following the data, suggesting that the Fed is now more likely to deliver a third hike before the end of the year.

• US: CPI for all items rises 0.4% in August as shelter and gasoline indexes increase
• CME Group FedWatch's Dec hike probability rose above 50% on CPI

In the meantime, a new threat from North Korea escalated the geopolitical tension on Thursday, increasing the demand for safe-havens such as the U.S. T-bonds and forcing the yields to erase their gains, hence weighing on the greenback. As of writing, the DXY was at 92.28, down 0.1% on the day. The negative market sentiment could help the CHF to show resilience against the buck in the remainder of the day. Major equity indexes also started the day lower, reflecting the risk-off mood in the markets.

Technical outlook

Nonetheless, the pair is recording gains for the fourth day in a row on Thursday and the RSI indicator on the daily graph remains above the 50 mark, suggesting that the short-term bullish price action is likely to continue. The initial hurdle for the pair aligns at 0.9700/05 (psychological level/daily high), ahead of 0.9765 (Aug. 16 low) and 0.9810 (May 30 high). On the flip side, supports align at 0.9640 (100-DMA), 0.9575 (20-DMA) and 0.9500 (psychological level).