In the European session on Friday, the USD/CHF pair continued its upward trajectory, reaching 0.8860. The Swiss Franc strengthened, buoyed by a robust US Dollar and expectations that the Swiss National Bank (SNB) might initiate a rate-cut cycle.
The US Dollar Index (DXY), reflecting the Greenback’s value against six major currencies, has stabilized around 104.20 following a sharp recovery from 103.70.
The appeal of the US Dollar received a boost from elevated monthly core Personal Consumption Expenditure Price Index (PCE) data for January in the United States. This suggests a challenging path to the Federal Reserve’s (Fed) 2% inflation target. Monthly core inflation, meeting expectations at 0.4%, exceeded the 0.2% pace required for price stability.
Simultaneously, diminishing price pressures in the Swiss economy have heightened expectations of SNB rate cuts in March. January’s inflation, falling to 1.3% against a forecast of 1.7%, has provided room for the SNB to adopt a dovish monetary policy stance.
Market attention today is directed towards the US ISM Manufacturing PMI for February, set to be published at 15:00 GMT. Investors anticipate a reading of 49.5, up from January’s 49.1 but still below the crucial 50.0 threshold.
The USD/CHF pair experienced an upward surge, breaking out of the consolidation range between 0.8778 and 0.8824 in a four-hour timeframe. This consolidation, indicative of reduced volatility with narrow ticks and low volume, typically precedes a breakout leading to increased volatility, wider ticks, and higher volume.
The short-term outlook remains bullish, supported by the ascending 20-period Exponential Moving Average (EMA) at 0.8821.
The 14-period Relative Strength Index (RSI) has entered the bullish range of 60.00-80.00, signaling a positive momentum shift.
Further upside potential is anticipated if the asset surpasses the three-month high at 0.8886, potentially unlocking gains towards the lows of September 20 at 0.8932 and November 8 at 0.8976.
Conversely, a decline below the February 13 low of 0.8746 would expose the asset to the round-level support at 0.8700, followed by the high of February 1 around 0.8650.
