The USD/CHF pair is experiencing downward pressure, hovering above the key support level of 0.9100 during Tuesday’s early American trading session. This drop is attributed to the weakening of the Swiss Franc against the US Dollar Index (DXY), which fell to 105.80 following S&P Global‘s release of disappointing preliminary PMI data for April.
The agency’s report indicated that both the Manufacturing and Services PMI figures fell short of expectations. Manufacturing PMI dipped below the crucial 50.0 mark, indicating a contraction, with a reading of 49.9 compared to expectations of 52.0 and the previous reading of 51.9. Similarly, Services PMI declined to 50.9 from the consensus of 52.0 and the previous reading of 51.7.
Moving forward, market focus will shift to the release of the United States core Personal Consumption Expenditure Price Index (PCE) data for March on Friday. This data is the Federal Reserve’s preferred measure of inflation and is expected to show a steady 0.3% month-on-month growth, with annual inflation easing to 2.6% from 2.8% in February. These figures will impact market expectations of Fed rate adjustments, currently anticipated during the September meeting.
READ– Swiss Franc (CHF) Gains Amidst Increased Risk Aversion
US Treasury yields rose to 4.64% as the Fed maintains that the current monetary policy framework is appropriate, citing persistently higher inflation in the first quarter of this year.
On the USD/CHF pair’s four-hour chart, a Rising Wedge pattern is forming, suggesting limited upside potential and a potential breakdown. The 20-period Exponential Moving Average (EMA) at 0.9100 is closely aligned with the Swiss Franc asset, indicating uncertainty among traders.
The 14-period Relative Strength Index (RSI) is ranging between 40.00 and 60.00, suggesting a period of consolidation ahead.
A further decline is likely if the asset breaks below the psychological support level of 0.9000, potentially targeting the March 22 low at 0.8966, followed by the March 1 high at 0.8893.
Alternatively, an upward movement above the April high of 0.9150 could push the asset towards the key support level of 0.9200, with a breach potentially leading to a further rise to the October 4, 2023 high at 0.9232.