USD/CHF is trading modestly lower relative to Monday’s N.Y. close, currently holding near the 0.9880 level, down 0.07%. The pair remains overbought on both a daily and weekly basis according to the Stochastic, a price momentum indicator. Thus, range trading could continue to define price action over the short term.
However, volatility has the potential to become a factor later today, as the U.S. is set to release September CPI data at 8:30am EST. Consensus estimate for Sept. CPI is 0.3%, while the Core CPI consensus forecast is at 0.2%. This will be a key metric in the Federal Reserve’s decision to raise rates before the end of the year, a factor that will have bearing on the dollar. As of Monday’s close, Fed Fund futures were indicating a 69.5% chance of a rate increase at the December meeting. With last week’s decisive breakout from a symmetrical triangle shown on the weekly chart, the current bias in USD/CHF is to the upside, with a breakout from the current consolidation expected. Such a move taking place with overbought conditions still a factor on the daily chart would be considered a sign of underlying strength.
Near term resistance is at the recent high at 0.9913, followed by key resistance at the May/July rally highs at 0.9956/0.9950. A breakout above this level would be considered another bullish development for the pair that is likely to lead to further gains in the weeks ahead. Last week’s breakout from the weekly symmetrical triangle calls for an eventual climb to the 2015 high at 1.0330.
On the downside, support is at last Friday’s 0.98533 reaction low, followed by former resistance at the 0.98188 level, defining the mid-September corrective top. A decline to this level would fall short of retracing 38.2% of the advance from the September low, thereby qualifying as a minimal pullback that leaves the pair well-positioned to recover and resume the recent rally. And, with the intermediate term bias to the upside, near term declines appear best used as buying opportunities in anticipation of further gains in the weeks ahead.
The Swiss data calendar is light this week, with the only release being the September Trade Balance on Thursday. In the U.S., following today’s release of CPI, Housing Starts/Building Permits will be released Wednesday at 8:30am EST, while Existing Home Sales are due out Thursday at 8:30am EST. This week’s schedule is also heavy with speaking engagements by Federal Reserve officials. Fed Vice Chair Stanley Fischer spoke Monday and reiterated concerns that low interest rates may leave the U.S. economy vulnerable to shocks. On Wednesday, the Fed will release its latest beige book, a review of regional economic conditions. The Fed’s Williams and Dudley will also speak this week.