USDCHF plummets below 0.9700 and breaks the 50-DMA after a softer US CPI report

• USDCHF plunges towards a fourth-month-old upslope support trendline, around 0.9680s.
• A softer US inflation report weakened the American Dollar, as investors expected the Federal Reserve to hike less aggressively.
• Fed officials commented that September’s rate hike projections need to move higher.

The USDCHF tumbled below the 50 and 100-day Exponential Moving Averages (EMAs) following the release of a much-awaited US inflation report which was lower-than-expected, spurring a risk-on impulse in the financial markets, as speculators priced in a less aggressive Federal Reserve policy stance. At the time of writing, the USDCHF is trading at 0.9676, below its opening price.

Inflation in the US eases, with headline inflation below 8%

A cooler-than-expected US inflation report revealed by the US Department of Labor weighed on the American Dollar. The US Consumer Price Index for October rose by 7.7% YoY, below estimates close to 7.9&. In the meantime, excluding volatile items like food and energy, the so-called core CPI increased by 6.3% YoY, below the 6.5% expected. Once the data crossed wires, the US Dollar Index, which tracks the buck’s value against six peers, plunged and, at the time of typing, extended its losses to 2%, at 108.222.  

At the same time, the Initial Jobless Claims for the last week jumped more than estimated, portraying the Federal Reserve monetary policy’s effects on the labor market.

Following the release, the USDCHF dived towards a four-month-old upslope support trendline, drawn from the August 2022 lows that pass at around the 0.9670-80 area. The USD weakness was triggered due to Fed officials signaling the pace of interest-rate hikes would slow down at a specific time, so the October figures are opening the door towards its first 50 bps rate hike at the December meeting.

Meanwhile, the CME FedWatchTool showed that money market futures have priced in a 50 bps rate hike by the Federal Reserve, as odds are at 80%, while a day ago, the chances were at 50%.

Elsewhere. Fed officials crossing newswires said that even though the October inflation report was positive, the FOMC has to do all it can to tackle inflation, according to the Dallas Fed President Logan. Meanwhile, Cleveland’s Fed Daly and Philadelphia’s Harker said that the current Federal fund rates (FFR) are in the restrictive territory, though Daly said that rates need to be higher than September forecasts.

USDCHF Key Technical Levels