FX

USD/CHF prints mild gains above 0.9300 as traders await Fed’s favorite inflation gauge

  • USD/CHF grinds higher after rising the most in a week, lacks upside momentum of late.
  • US Dollar cheers firmer data, hawkish Fed bets and US President Biden’s comments.
  • Headlines surrounding China, Russia flash mixed clues amid sluggish session.
  • US Core PCE Price Index, Durable Goods Orders will be crucial for the bulls to keep reins.

USD/CHF seesaws around intraday high as traders await fresh clues during early Friday. In doing so, the Swiss Franc (CHF) pair portrays the market’s cautious mood ahead of the key US data, despite defending the US Dollar’s strength. Also challenging the pair bulls could be the mixed macros and the year-end season that knocks on the door.

Optimism over China’s pro-growth policies recently gained momentum after the People’s Bank of China (PBOC) marked the biggest weekly cash injection in two months. The same joins the policymakers’ pledge to defend the world’s second-largest economy to overcome the Covid-inflicted pessimism via more stimulus. It’s worth noting that the chatters surrounding Evergrande’s nearness to an offshore debt restructuring plan also underpin the cautious optimism in the markets.

On the other hand, a rally in Shanghai’s hospitalization and challenges to China’s medical system due to the latest easing of the Zero-Covid policy seems to probe the optimists. Further, the US Senate’s passage of a $1.7 trillion government funding bill and the latest comments from US President Joe Biden showing readiness to tame inflation keeps USD/CHF buyers hopeful.

It should be noted that an increase in the hawkish Fed bets, backed by Thursday’s US data, also underpins the USD/CHF upside. That said, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

Amid these plays, S&P 500 Futures print mild gains while ignoring the Wall Street benchmarks. Further, the US 10-year Treasury bond yields extend the previous day’s rebound near the one-month high, marked early in the week.

Looking forward, USD/CHF traders may pay attention to the risk catalysts ahead of the US Core Personal Consumption Expenditure (PCE) – Price Index, the Federal Reserve’s preferred inflation gauge, as well as Durable Goods Orders, for November. As per the market consensus, the US Core PCE Price Index remains unchanged at 0.2% MoM. However, the Annualized forecasts suggest softer figures of 4.7% YoY versus 5.0% previous readings. Further, US Durable Goods Orders could register a contraction of 0.6% in November compared to the previous increase of 1.1% (revised from 1.0%). Given the mixed forecasts for the key data, as well as the recent improvement in sentiment, the USD/CHF buyers should remain cautious.

Technical analysis

A daily closing break of the 13-day-old resistance line, now support around the 0.9300 threshold, keeps USD/CHF buyers hopeful of poking the monthly resistance line, around 0.9400 by the press time.

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