USD/CHF renews monthly low around 0.9515 ahead of US PCE inflation

USD/CHF takes offers to refresh the monthly low near 0.9515 heading into Friday’s European session amid broad US dollar weakness.

The Swiss currency (CHF) pair’s latest losses could be linked to the recession fears in the US and extended south-run by the US Treasury yields. Also exerting downside pressure on the USD/CHF prices is the cautious mood ahead of the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.5% MoM for July versus 0.3% prior.

It’s worth noting that the US Dollar Index (DXY) drops to the lowest level since July 05 as the Treasury yields remain pressured around a three-month low amid recession fears. The US 10-year Treasury yields fade early Asian session rebound while declining to the fresh low since April, near 2.66% at the latest.

Following Fed Chair Jerome Powell’s teasing of “neutral rates”, USD/CHF traders should have traced the Flash readings of the US Q2 GDP, which marked the “technical recession” by declining for the second consecutive time, to decline further. That said, the first estimations of the US Q2 GDP printed -0.9% Annualized figure versus 0.5% expected and -1.6% prior. Further, the US Initial Jobless Claims also rose more than expected by 253K, with 256K during the week ended on July 22.

Elsewhere, US policymakers, including Fed’s Powell and Treasury Secretary Janet Yellen, tried to tame the economic recession fears but fail to succeed of late.

Even so, the downbeat yields and challenges for the hawkish Fed moves appear to have favored the US stock futures, as well as the Asia-Pacific shares, as USD/CHF traders await the Swiss KOF Leading Indicator for July, expected 95.2 versus 96.9 prior.

On a different page, the Swiss National Bank (SNB) posts the biggest ever first-half loss per Reuters and should have ideally weighed on the USD/CHF prices but did not. “The Swiss National Bank reported a first-half loss of 95.2 billion Swiss francs ($100.08 billion) on Friday, the biggest six-month loss posted by the central bank since it was set up in 1907,” said Reuters. The news also mentioned that the SNB's results were hit by stock market declines, falling bond prices and the franc's appreciation which severely dented the value of its massive foreign currency holdings.

Technical analysis

A clear downside break of the four-month-old ascending trend line, near 0.9600 by the press time, directs USD/CHF sellers towards the 16-month-long horizontal support zone near 0.9595-72.