USD/CHF: Positive US Data Pushing Pair Toward 0.97200

Summary:

The USD/CHF is pushing higher, thanks to upbeat US data and a cooling of inflation numbers out of Switzerland.

The USD/CHF is up 0.11% this Thursday and looks to achieve the third straight day of gains if the price action stays at the same level or higher by the end of the trading day. The uptick in the USD/CHF comes from renewed dollar strength that was triggered late Tuesday by hawkish commentary from several regional Federal Reserve bank presidents, notably St. Louis Fed President James Bullard.

These comments triggered a recovery in long-term US bond yields, which added 6.73% on Tuesday. As a result, the US 10-year Treasury Note is up 0.74% this Thursday, spurring more yield flows into US-denominated assets and creating more demand for the greenback.

Further adding to the bullish sentiment was the upbeat ISM Services PMI and Factory Orders data. At 56.7, the Institute of Supply Managers index that measures business activity in the US services sector beat the market estimates of 53.5. Also, it showed an increase over the June 2022 number, which came in at 55.3.

Factory orders rose 2.0% in July 2022, beating estimates of a modest increase of 1.3% and trumping the previous month’s upward revision of 1.8%. On Wednesday, data released from the Federal Statistics Office showed that the Swiss Consumer Price Index (m/m) fell from 0.5% to 0.0%, keeping the Swiss Franc on offer relative to the greenback.

USD/CHF Forecast

The bullish engulfing pattern truncated the downside move that followed the breakdown of the neckline of the previous double top pattern. The upside move from the candlestick pattern broke the 0.96496 resistance but hit a wall at the 0.96296 barrier.

The bulls need to remove this resistance to clear the path toward 0.97203 (4 May and 8 June lows). Additional upside targets are seen at the 0.97957 resistance (3 May and 8 July highs) and at 0.98905, the site of the 5 May, 10 June and 14 July highs.

Conversely, the bears would need to force rejection at 0.96296 (26 April/24 June highs), with a breakdown of the 0.95496 and 0.94635 support levels, for the downside move to resume. This leaves targets at 0.93758 (29 March and 8 April highs) and 0.92953 (28 March and 12 April lows). The measured move from the tops is expected to find completion at the 0.91899 support level, where the previous low of 31 March is found.