USD/CHF sell-off resumes after strong Swiss inflation numbers

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on May 17, 2021
  • The USD/CHF pair retreated today after the strong Swiss PPI data.
  • The data showed that the producer price index rose by 1.8% year-on-year in April.
  • The pair will react to the upcoming FOMC minutes that will come out on Wednesday.

The USD/CHF price retreated on Monday after the relatively stronger Swiss producer price index (PPI) data. The pair declined to 0.9005, which was the lowest level since Thursday last week.

USD/CHF
USD/CHF price action

Swiss inflation rising

The USD/CHF is declining after data by the Swiss Federal Statistics agency showed that the country’s PPI rose in April as the recovery process accelerates. The headline PPI rose from 0.6% in March to 0.7% in April. This increase led the year-on-year increase to 1.8% after declining by 0.2% in the previous month. 

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The numbers two weeks after data showed that the headline consumer price index rose by 0.3% in April, the first positive reading since January 2020. While the numbers are below the SNB target of 2.0%, they are heading in the right direction.

The data came a few days after the US published strong PPI data helped by higher oil and other commodity prices. In total, the headline PPI rose by 6.2% in April, the highest reading since 2011. 

Indeed, analysts expect that the Swiss economy will have a stronger recovery than expected. In a recent report, the State Secretariat for Economic Affairs (SECO showed that consumer confidence has risen to pre-pandemic levels. The agency also upgraded the economic outlook. The same stance was maintained by the Swiss National Bank (SNB), which expects that the economy will recover by between 2.5% and 3% this year. 

Later this week, the USD/CHF pair will react to the minutes of the Federal Reserve that will come out on Wednesday. These minutes will show the thinking of Fed officials in the meeting held in April. In it, they left interest rates and quantitative easing policies unchanged.

USD/CHF technical forecast

USD/CHF
USD/CHF technical chart

The four-hour chart shows that the USD/CHF pair has been in a steep downward trend in the past few weeks. Indeed, the pair has fallen by almost 5% from its year-to-date high of 0.9472. The downward trend has been supported by the 25-day and 50-day exponential moving averages (EMA). The pair is also attempting to move below the 61.8% Fibonacci retracement level. It has also formed a descending channel that is shown in black. 

Therefore, the pair may keep falling. For this to happen, bears will need to move below the important support at 0.8986, which was the lowest level last week.

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