Why is the US Dollar Still Falling Despite a Rise in Consumer Inflation?

Summary:

The USDCHF falls on the day despite rising consumer inflation, as investors show preference for safe-haven assets over the embattled greenback.

Data from the US Bureau of Labour Statistics show that the consumer price index for July 2020 matched the increase seen in June 2020 at 0.6%, while the core component (CPI ex. food and energy) climbed from 0.2% in June to 0.6% in July. These numbers were better than the 0.3% and 0.2% predicted by economists for the CPI and core CPI respectively.

However, the inflation results continue to be a far cry from the targets set by the Federal Reserve to consider withdrawing the stimulus program and consider an increase in interest rates. Given the prevailing negative sentiment around the US Dollar, the USDCHF did not show much of an upside response to the news, indicating that traders are still tilting towards the safe-haven assets this Wednesday. The US Dollar is presently losing ground against the Swiss franc: it is down 0.61% to trade at 0.91123 as at the time of writing.

This picture also goes in tandem with the report by the CFTC on the positioning of traders, which indicated that speculative net USD shorts rose to $28.94 billion, an increase over the previous figure of $24.27 billion.

Technical Outlook for USDCHF

The daily chart shows that the current daily candle engulfs that of yesterday, setting up an engulfing pattern that could potentially have further bearish consequences on price action. The 4-hour chart shown below indicates that the USDCHF is testing a previous intraday resistance at 0.91175. If this gives way, then we can expect a potential push towards yesterday’s S1 pivot at 0.90479, with 0.89953 coming in close as possible support, with a possible pitstop at today’s S1 pivot located at 0.90339.

On the flip side, there are obstacles on the upside to a potential bounce of the pair from present levels, with 0.91533 being the major obstacle along the way. Other minor pitstops could come in at 0.91380 (today’s central pivot). The R1 pivot resistance at 0.92264 could come into view if price scales above 0.91533.