inverse head and shoulders pattern forms

These numbers came a few weeks after the US released encouraging inflation data. The headline Consumer Price Index (CPI) dropped to 3.3% while the core CPI moved to 3.4%. 

Looking ahead, the next key important USD/CHF will be the upcoming US inflation data set for Thursday. Analysts expect the numbers to reveal that the headline Consumer Price Index (CPI) remained at 0.2% (MoM) and 3.4% (YoY) in June. 

They also expect the data to reveal that the headline CPI rose from 0.0% in May to 0.1% in June and dropped from 3.3% in May to 3.1% in June. If these numbers are correct, it will be a positive thing for the Fed.

In a statement on Tuesday, Jerome Powell noted that the Fed welcomed these inflation numbers but warned that it was too early to predict when the cuts will happen. 

Analysts expect the Fed could signal that it will start cutting rates in September. It will continue watching these numbers and signal whether it will cut rates at its Jackson Hole Symposium in Wyoming. In a statement, analysts at ING said:

“Our position is that the Fed doesn’t want to cause a recession if they can avoid it and if the data allows we expect the Federal Reserve to start moving monetary policy from “restrictive” territory to “slightly less” restrictive policy from September.”

At the same time, the Swiss National Bank (SNB) is expected to continue interest rates. It has already started cutting interest rates, moving from the year-to-date high of 1.75% to the current 1.25%. 

The spread between the Fed and SNB interest rates will remain being wide, creating a good carry trade opportunity. Carry trade is where investors borrow a low-yielding currency like the Swiss franc to invest in a higher-yielding one.

USD/CHF technical analysis

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