Uncle Sam is printing its July inflation numbers tomorrow at 12:30 pm GMT!
In case you missed it, U.S. consumer prices jumped by a whopping 9.1% in June when markets expected an 8.8% increase.
The annualized core CPI also clocked in at 5.9%, which is slower than May’s 6.0% uptick but higher than forecasts of a 5.7% increase.
Expectations of a 100-bps rate hike boosted USD/CHF from its intraday lows at the time, but the pair also gave up most of its gains in less than three hours as markets priced in the Fed’s hawkish plans succeeding in controlling inflation.
Will we see a similar scenario play out this week?
USD/CHF is trading inside a 125-pip range, hinting that it’s waiting to find its next direction after breaking a weeks-long downtrend.
Technical indicators aren’t much help with Stochastic hanging in the middle of its overbought/oversold band while the 100 and 200 SMAs fail to show directional biases.
Maybe tomorrow’s U.S. CPI release would make or break USD/CHF’s range support.
Traders see the headline CPI slowing down from 9.1% to 8.7% but core CPI rising from 5.9% to 6.1%. That’s still uncomfortably high for the Fed!
Signs that inflation remains elevated despite the Fed’s multiple rate hikes and lower commodity prices would weaken expectations of Fed rate cuts in early 2023.
Hawkish Fed expectations could boost USD/CHF to its .9600 mid-range or .9650 range resistance levels.
If this week’s reports result in risk-taking or dollar-selling, however, then USD/CHF could break below the .9550 support and retest its August lows closer to .9470.
What do you think? Will USD/CHF bulls and bears continue to trade the range? Or will we see a breakout this week?
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