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USD/CHF loses 50-day average amid broad USD weakness

The dollar continues to decline, despite soaring rate-hike expectations.

The greenback has been suffering since yesterday’s US inflation data, which showed that inflation is in no way peaking. The yearly change remained above the 5% threshold, while the core CPI stayed at 4.0%. Both numbers are way above the Fed’s 2% inflation target.

As a result, the market expects the Fed to raise rates by September 2022 and continue hiking the fed funds in 2023 . The QE should end in July 2022, according to the official market forecasts.

Fed remains hawkish

Later today, three FOMC members are scheduled to speak – Bostic, Barkin, and Williams . Investors will likely pay attention to their words as they can provide clues whether the central bank is indeed ready to start tapering its bond purchases this year.

Additionally, it seems that the Fed officials do not appear swayed from their QE tapering plans by the slowdown in jobs growth, possibly reinforcing the thesis of monetary policy tightening.

Fed officials continue to signal a strong preference for moving ahead with a relatively brisk 6 to 9 month tapering of asset purchases, likely announced at their next meeting 4th November and starting before the year is out, analysts at Westpac noted Thursday.

Moreover, US PPI indices will be released during the US session, expected to continue trending higher. The year-on-year change is forecast to climb to 8.7% from 8.3% previously. At the same time, the core indicator should increase to 7.1%, up from 6.7% in August. The usual Thursday’s jobless claims are also on the agenda.

The Swiss calendar brought domestic producer and import prices for September. The monthly change declined notably to 0.2% from 0.7% previously, while the year-on-year gauge ticked higher to 4.5%. However, Swiss data rarely cause some volatility in the USD/CHF pair, and traders ignored the numbers today.

Downside risks seem limited

The daily chart remains pretty bullish , but the USD/CHF pair has lost its 50-day moving average at 0.92, possibly sending the USD further lower. The key support of the current uptrend wave is at around 0.9155, where the medium-term uptrend line is located.

As long as the greenback trades above it, the medium-term bull market remains intact. Conversely, a decline below it would likely clear many stop-losses of long positions, potentially leading to a further slide toward 0.91.

However, the daily chart is starting to look like a rising wedge pattern, which is a bearish reversal formation. Furthermore, there is a bearish divergence between the price and the MACD indicator, indicating a possible reversal as well.

The greenback needs to reclaim the 0.9250 level to cancel the immediate bearish threat. Afterward, the next resistance could be in the 0.93 zone.

usdchf daily chart USD/CHF daily chart, Source: Author´s analysis, tradingview.com

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