USD/CHF breaks key resistance after weak Swiss inflation and PMI data

on Jul 1, 2021
  • The USD/CHF pair rose above a key resistance level after the latest Swiss inflation data.
  • The country’s inflation and PMI data missed analysts’ forecast.
  • The pair will next react to the latest UK non-farm payrolls data.

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The USD/CHF rose to the highest level since April after the relatively weak Switzerland inflation and PMI data. The pair rose to 0.9270, which was the highest level since April 13. It has risen by almost 4% from its lowest level in June.

Swiss franc chart

Switzerland inflation disappoints

The Swiss economy underperformed in June, according to the latest numbers by the Federal Statistics Office (FSO). The country’s consumer price index (CPI) declined from 0.3% in May to 0.1% in June. This decline was lower than the median estimate of 0.2%. The CPI rose by 0.6% on a year-on-year basis, lower than the median estimate of 0.7%. This inflation is substantially lower than the Swiss National Bank (SNB) estimate of 2.0%. Prices of fruiting vegetables and international packaged holidays rose while that of air transport fell.

The USD/CHF pair also rose after the latest Swiss retail sales numbers. The volume of retail sales increased by 2.8% in May compared to the same period in 2020. This was a better increase compared to the previous month’s decline of 1.8%. Food, drinks, and tobacco sales declined as more people went out while all non-food sectors saw an improvement. 

Meanwhile, the Switzerland manufacturing and services PMI declined from 69.9 in May to 66.7 in June. This decline was worse than the median estimate of 69.7. Still, with the PMI above 50, it sends a signal that business activity in the country is doing relatively well.

Looking ahead, the USD/CHF pair will react to the latest US non-farm payroll (NFP) data. The numbers are expected to show that the economy added more than 700k jobs while the unemployment rate declined to 5.7%. As such, there are signs of a divergence emerging between the Fed and the SNB.

USD/CHF technical forecast

USD/CHF chart

The four-hour chart shows that the USD/CHF pair has been in an upward trend recently. The pair has managed to move above the 50% Fibonacci retracement level and is approaching the 61.8% level. It also managed to move above 0.9237, which was the highest level on June 21. As such, the pair has made a bullish breakout. It is also being supported by the 25-day and 15-day exponential moving averages. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.9350.