The USD/CHF pair lost more than 50 pips in the last hour and plummeted to its lowest level in more than ten days at 0.9704 as the USD came under a heavy selling pressure after the inflation data from the U.S. failed to meet the market expectations. As of writing, the pair was trading at 0.9716, losing 0.4% on the day.
According to the data released by the U.S. Bureau of Labor Statistics, inflation measured by the core CPI in September rose by 0.1% on a monthly basis in August following a 0.2% increase in August. Moreover, retail sales rebounded to 1.6% in September from -0.1%, however, came in below the market estimate of 1.7%.
- US: Retail sales for Sep 2017 were $483.9 billion, an increase of 1.6% from the previous month
- US: CPI for all items increases 0.5% in September as gasoline index rises sharply
Assessing the details of the inflation report, "today's report gives a tentative support for the Fed's hypothesis. Wireless phone service, which Yellen specifically cited as a transitory headwind, rose 0.4%. It is the first increase in 14 months. Shelter costs (~1/3 of headline CPI) also have stabilized. They rose 0.3% after a 0.5% increase in August. However, the decline in medical costs (-0.1%) seems to suggest some transitory factors may still be in play, even if diminished. Separately, note that that new and used car prices fell in September," BBH analysts noted.
In the meantime, major equity indexes in the U.S. started the day on a positive note with the Dow Jones Industrial Average and the S&P 500 gaining 0.15% and 0.1% respectively, reflecting a positive market sentiment and limiting the pair's losses for the time being.
Despite that recent fall, the RSI indicator on the daily graph remains near the 50 handle, suggesting that the pair could have a difficult time edging lower in the near-term. The first technical support for the pair could be seen at 0.9640 (100-DMA) followed by 0.9590 (Sep. 20 low) and 0.9500 (psychological level). On the upside, resistances align at 0.9780 (200-DMA), 0.9835 (Oct. 6 high) and 0.9900 (psychological level).
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