USD/CHF declines towards 0.9660 as DXY seeks more correction

• USD/CHF has displayed a breakdown of the 0.9678-0.9682 trading range amid weaker DXY.
• Fed’s preference for bringing price stability indicates a continuation of the rate hike cycle.
• Swiss Real Retail Sales are seen higher at 3.3% vs. 1.2% reported earlier.

The USD/CHF pair has given a downside break of the consolidation formed in a narrow range of 0.9678-0.9682. Earlier, the asset displayed exhaustion signals after failing to overstep the critical hurdle of 0.9700. The major has witnessed a lack of conviction in stepping above the crucial hurdle of 0.9700 as the US dollar index (DXY) is into a correction mode after a juggernaut rally.

The DXY has corrected to near 108.68 at open as investors are preferring long liquidation after a sheer upside. The asset remained in a positive trajectory after the hawkish commentary by Federal Reserve (Fed) chair Jerome Powell at the Jackson Hole Economic Symposium. Fed’s preference for scaling down the price rise index over growth prospects spooked the market sentiment.

Thinking from the perspective of households in the US economy, a restrictive approach on interest rates to cool down the heating inflation, which is hurting the paychecks of the households is quite justified. The US inflation rate is skyrocketing, and a one-time exhaustion signal is not enough to provide a sit-back and relaxed situation for Fed policymakers.

O the Swiss franc front, investors’ entire focus is on the Real Retail Sales data, which is expected to improve dramatically to 3.3% from the prior release of 1.2%. Investors are aware of the fact that price pressures are scaling higher in the Swiss economy, therefore retail sales data is contaminated with higher prices. Still, a decent improvement in the economic data indicates an acceleration in the overall demand.