Bulls Look for Rally to 0.94, Awaits FOMC
- The USD/CHF pair ended the week higher despite some conflicting US economic data during the week.
- As the US consumer price rise slowed in August, the Federal Reserve found a reason to postpone reducing bond purchases.
- The week’s major event is the FOMC interest rate decision, followed by the press conference on Wednesday.
The weekly forecast for the USD/CHF pair is bullish as the net positive change for the week is 112 pips. Moving into the next week, the FOMC press conference is the key market mover.
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The USD/CHF pair ended the week higher despite some conflicting US economic data during the week. The pair started the week at 0.9212, marked the weekly highs near 0.9324 on Friday. After that, however, the price saw a dip to the weekly loss of 0.9163 before finding a mid-week reversal and turned higher.
As the US consumer price rise slowed in August, the Federal Reserve found a reason to postpone reducing bond purchases. As a result, after the consumer price index was released on Tuesday, the USD/JPY fell to a weekly low on Wednesday.
On Thursday, it was forecast that retail sales for August would decline for the second consecutive month. Within a month, Michigan’s consumer sentiment dropped to its lowest level in ten years. However, despite limited automobile sales, consumers had the busiest month since January. The pair marked two consecutive days with winning streaks on Friday.
A slight increase was also noted in government bond yields. Through Friday, the yield on the 10-year note rose 3 basis points to 1.370% after opening the week at 1.340%, falling 1.279% on Tuesday’s CPI data.
There was no major data release from Switzerland. Hence, the market remained guided by the US dollar strength.
The Fed’s Jerome Powell says that a $120 billion monthly cut to bond purchases is likely to occur by year’s end. His announcement came after the Nonfarm Payrolls (NFP) announced that over a million new jobs had been created in June and July. The month ahead should be strong as well. However, the disappointment in August, when the consensus forecast didn’t exceed 500,000, has shaken firm confidence that the Fed will announce its tapering plan at its meeting in September.
Key data events from Switzerland next week
The economic calendar is relatively light next week for the CHF. However, the SNB interest rate decision on Wednesday may trigger mild volatility in the market.
Key data events from the US next week
The week’s major event is the FOMC interest rate decision, followed by the press conference on Wednesday. Investors will likely look for clues of rate hikes and tapering from the press conference. The next important event is Market Flash PMI data on Thursday.
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USD/CHF weekly technical forecast: Broken trendline and range
The USD/CHF price managed to break the long-held resistance at 0.9250. The mid-0.9200 area also coincided with the upper band of the range and descending trendline. The pair managed to break the resistance with rising volume and decent strength. However, we can expect a minor pullback towards the 0.9260-0.9280 area that may provide additional buying opportunities. On the upside, the price may find some resistance at 0.9375 ahead of 0.9400.
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