USD/CHF gains momentum as bears take a breather, pair inch towards 0.8830

• USD/CHF inches higher to 0.8830 after two sessions of losses.
• US PCE figures take a mixed turn, PCE dips to 2.5% YoY.
• Dovish bets on the Federal Reserve remain steady and present a challenge to the USD.

In Friday's trading session, the USD/CHF managed to improve, closing up by 0.15% at around 0.8830 against the backdrop of fluctuating Personal Consumption Expenditures (PCE) numbers released by the United States. After consistent declines, this upward move gives the bears some breathing room.

Inflation in the US showcased through the change in the Personal Consumption Expenditures (PCE) Price Index, marginally declined to 2.5% on a year-on-year perspective in June from 2.6% in May, as reported by the US Bureau of Economic Analysis. These figures met market expectations. On a monthly analysis, the PCE Price Index witnessed a 0.1% rise, following no change in May. The core measure came in higher than expected and rose by 2.6% YoY vs the 2.5% expected.

Analyzed from a broader perspective, the robust growth combined with mild disinflation in the US economy suggests the Fed may not be aggressive in cutting the funds rate, contrary to the current market sentiment. As of now, the Fed Funds futures price in nearly three cuts of more than 60bps by December 2024, with a total easing of 136bps projected over the next year. Therefore, there appears to be space for an upward revision of Fed funds rate anticipations, which might boost the USD and Treasury yields and hence prompt upward movements to the pair.

USD/CHF technical analysis

The technical outlook for USD/CHF remains bearish and the pair will close a 0.70% losing week, it's fourth in a row and tallying a 1.50% loss since late June. In addition, the pair continues trading below the 20, 100, and 200-day Simple Moving Average (SMA), and indicators persist in the negative trajectory.

The support levels remain untouched at 0.8750 and 0.8730. The suggested resistance levels remain at 0.8800, 0.8830, and 0.8850, hinting at a possible upswing.

USD/CHF daily chart