USDCHF Analysis | Traders focus on inflation

BY Janne Muta

|January 9, 2024

USDCHF Analysis - Switzerland's December inflation rate rose to 1.7%, driven by increased costs in alcoholic beverages, tobacco, housing, and energy. Despite a decline in food sales, retail sales overall improved, increasing by 0.7% year-on-year, buoyed by a surge in non-food products like technology and sports equipment.

However, the unemployment rate edged up to 2.3%, a peak not seen since April 2022, with youth unemployment also rising to 2.2%.

In the US, the focus is on the forthcoming consumer-price-index and producer-price data, expected to significantly impact market sentiment. The stable oil market, despite Middle East instability, suggests potential softness in oil bids, which could lead to lower inflation in the near future.

In November 2023, the US maintained its core consumer price inflation rate at 4%, a two-year low, with a minor monthly increase from October's 0.2% to 0.3%. The broader annual inflation rate decreased to 3.1%, influenced by notable drops in energy costs, marking the lowest in five months and slightly below analyst expectations.

However, consumer prices rose marginally month-over-month due to increased shelter costs, while core inflation remained steady at 4%. Analyst consensus sees the annualised headline inflation increasing slightly from 3.1% to 3.2%.

Summary of This USDCHF Analysis Report:

  • USDCHF has traded lower since October, currently below the June structure level of 0.8555. Stochastic oscillator indicates an oversold market, now edging higher. A break above 0.8577 could lead to 0.8820, aligned with the 50% Fibonacci level. However, continuing the bearish trend might retest the 0.8332 low.
  • A bearish rejection candle below the 0.8580 structure level aligns with the 20-period moving average. The 20 and 50-period moving averages point downwards.
  • USDCHF trades sideways between 0.8451 - 0.8455 support and 0.8547 - 0.8576 resistance on the 4-hour chart. The 20-period moving average crossing above the 50-period suggests momentum shift. A rally above 0.8577 is needed for trend reversal, otherwise, the bearish bias remains.

Read the full USDCHF analysis report below.

USDCHF Analysis

USDCHF Analysis, weekly chart

Weekly USDCHF analysis

USDCHF has been trading lower since October and is currently trading below a key market structure level (0.8555) created in June last year. The market has been oversold recently, as per the stochastic oscillator. However, over the past week, the oscillator has started to edge higher, indicating a loss of downside momentum.

If the market can decisively push above 0.8577, our USDCHF analysis suggests it could move to 0.8820, a level coinciding with the 50% Fibonacci retracement level. Alternatively, if the bearish trend continues, the market is likely to retest the 0.8332 low.

USDCHF Analysis, daily chart

Daily USDCHF analysis

The daily chart reveals a bearish rejection candle formed below a market structure level at 0.8580. At the time of writing, the 20-period moving average closely aligns with this level, adding to its technical significance. A rejection candle at resistance indicates lower prices, and if there is a decisive break below 0.8455, the market could trade down to 0.8332.

Moving average-based USDCHF analysis confirms the bearish indications, as both the 20 and 50-period moving averages are pointing lower. Alternatively, if the market breaks above the 0.8580 level, the measured move target at 0.8816 could become relevant.

USDCHF Analysis, 4h chart

Intraday USDCHF Analysis

USDCHF is trading sideways on the 4-hour chart between a support area at 0.8451 - 0.8455 and a resistance zone formed by the 23.6% Fibonacci retracement level at 0.8547 and 0.8576. The 20-period moving average has crossed above the 50-period, indicating a shift in momentum.

According to technical USDCHF analysis in this timeframe, the market is currently less bearish than it was in December and may be attempting to reverse the trend. For the reversal to complete, the market has to rally decisively above 0.8576; otherwise, the earlier bearish bias remains.

USDCHF analysis, client sentiment graph

Client sentiment analysis

90% of clients trading USDCHF are holding long positions, while 10% are holding short positions. Client sentiment data is being provided by TIO Markets Ltd.

It’s good to remember that retail client trading sentiment is a contrarian indicator as most retail traders are on average trading against market price trends. This is why experienced traders tend to trade against the retail client sentiment.You can follow the TIOmarkets client sentiment live on our Forex dashboard.

The next key risk events impacting this market

  • USD - 10-y Bond Auction
  • USD - Core CPI m/m
  • USD - CPI m/m
  • USD - CPI y/y
  • USD - Unemployment Claims
  • USD - 30-y Bond Auction
  • USD - Core PPI m/m
  • USD - PPI m/m

Potential USDCHF Market Moves

In the USDCHF analysis, there are distinct bullish and bearish scenarios to consider. On the weekly timeframe, a bullish outcome becomes likely if the market decisively breaches the 0.8577 level, potentially leading to a move towards 0.8820, a level that is closely aligned with the 50% Fibonacci retracement. Conversely, a retest of the 0.8332 low remains a possibility if the market fails to rally above 0.8577.

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How Would You Trade USDCHF Today?

I hope this fundamental and USDCHF analysis helps you to make better informed trading decisions. Check the latest market analysis for other instruments and subscribe to receive them in your inbox as soon as they are published

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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