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USD/CHF Price Forecast: Flat lines near 0.8100 as bulls await US inflation data

  • USD/CHF attracts some dip-buyers, though it remains confined in the weekly range.
  • September Fed hike bets and geopolitical risks limit USD losses and support the pair.
  • The bullish technical setup suggests that the path of least resistance is to the upside.

The USD/CHF pair reverses modest intraday losses and climbs to the top end of its daily range during the first half of the European session on Wednesday. Spot prices, however, remain confined within the weekly range and currently trade just below the 0.8100 mark, nearly unchanged for the day as traders seem hesitant ahead of US inflation figures.

The US Producer Price Index (PPI) and the Consumer Price Index (CPI) will be published on Thursday and Friday, respectively. The crucial data will be looked at for more cues about the US Federal Reserve's (Fed) policy path, which, in turn, will drive the US Dollar (USD) and provide a fresh impetus to the USD/CHF pair. In the meantime, rising September Fed rate hike bets and inflation risks stemming from persistently higher energy prices due to escalating US-Iran tensions should act as a tailwind for the Greenback.

The USD/CHF pair keeps the near-term bias constructive above the 100-day Simple Moving Average (SMA) at 0.8004 and a dense Fibonacci support band between the 61.8% retracement at 0.8028 and the 38.2% retracement at 0.8077. Meanwhile, the Relative Strength Index (RSI) around 50 suggests neutral momentum after earlier gains. The Moving Average Convergence Divergence (MACD), however, has turned slightly positive, hinting that upside pressure is moderating rather than reversing.

This suggests that the USD/CHF pair might continue to find some support near the 38.2% Fibo. retracement at 0.8077, which is followed by the 50.0% level at 0.8053 and the 61.8% retracement at 0.8028. A deeper pullback would expose the 100-day SMA at 0.8004, ahead of the 78.6% retracement at 0.7994 and the prior swing base near 0.7950. On the topside, initial resistance sits at the 23.6% retracement at 0.8107, with a break higher opening the way toward the cycle high around 0.8156.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

USD/CHF daily chart

Chart Analysis USD/CHF

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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