USD/CHF struggles near 0.9800 amid pre-ECB anxiety, risk-aversion ahead of US inflation

• USD/CHF fades upside momentum near a three-week high, probes four-day uptrend.
• Market sentiment remains sour ahead of the key data/events.
• Inflation, growth fears adds strength to the risk-off mood amid.
• Hawkish hopes from ECB, indecision over the US inflation could challenge immediate moves.

USD/CHF probes bulls during the fifth day of upside as it takes rounds to 0.9785-90 during Thursday’s mid-Asian session. In doing so, the risk barometer pair aptly portrays the market’s anxiety ahead of the key monetary policy decision from the European Central Bank (ECB), as well as Friday’s US Consumer Price Index (CPI) for May.

Other than the pre-data/event caution, fears of inflation and growth, amid hopes of more hawkish central bank moves, also weigh on the market sentiment. However, a lack of major catalysts tests the USD/CHF traders of late.

That said, the ECB is likely to unveil clues for a July hike but the same may not save the traders. The reason is that the bloc’s central bank is the last among the major ones to most-probably end the asset purchase during today’s meeting, which in turn tests the bears.

Elsewhere, softer prints of the Fed’s preferred inflation gauge, namely the Core PCE Price Index challenges the pre-CPI notion. That said, US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, stay firmer around the one-month high of late.

On a broader front, fears that faster monetary policy normalization will weigh on the economic transition, mainly due to the recent covid and geopolitical woes, which seem to have challenged the market sentiment. On Wednesday, White House spokeswoman Karine Jean-Pierre said they expect the inflation numbers to be released at the end of the week to be elevated. Additionally, the Organisation for Economic Co-operation and Development (OECD) cuts the global growth outlook for 2022 while World Bank (WB) President David Malpass warned that faster-than-expected tightening could recall a debt crisis similar to the one seen in the 1980s.

Against this backdrop, US 10-year Treasury yields seesaw around 3.05% after rising over five basis points (bps) to 3.04% the previous day. Also, S&P 500 Futures print mild losses near 4,110 after snapping a two-day rebound on Wednesday.

To sum up, the risk-off mood keeps the USD/CHF prices higher but the anxiety ahead of the key data/event tests the upside moves.

Technical analysis

A daily closing beyond the 21-DMA, surrounding 0.9730, enables USD/CHF bulls to aim for the monthly horizontal resistance near 0.9860.