USD/CHF gains ground amid USD strength ahead of CPI data

• USD/CHF trades with gains near the 0.8760 area, and bulls are recovering momentum.
• A negative market mood gives the USD traction, and the DXY jumped above 102.50.
• Ahead of CPI data on Thursday, Fed officials delivered mixed signals.

On Tuesday, the USD/CHF traded with gains for a consecutive day. The USD is gaining ground against its rivals due to a cautious market mood while markets try deciphering Federal Reserve (Fed) officials' mixed messages. On the Swiss side, no relevant data will be released during the session.

Federal Reserve officials are conveying conflicting messages to the markets. Michelle Bowman has indicated that further rises will likely be necessary, whereas John Williams has expressed that upcoming Federal Reserve choices remain uncertain. On Tuesday, Thomas Barking stated that he is not sure where the rates in the US will go, while Patrick Harker sounded a bit more hawkish, showing himself concerned with inflation not cooling down. 

Meanwhile, as per the CME FedWatch tool, investors remain confident that the Federal Reserve won’t hike in the remainder of 2023. They are discounting low odds of 14% of an increase in September and a 30% probability of a hike in November.

For the rest of the week, the highlight is the release of inflation data on Thursday, with the Headline Consumer Price Index (CPI) index expected to accelerate to 3.3% YoY and the Core CPI, which is seen falling to 4.7% in the same month. In that sense, inflation data will be key for investors to place their bets regarding the next Federal Reserve (Fed) decision.

USD/CHF Levels to watch

According to the daily chart, the outlook for the USD/CHF is neutral to bullish for the short term as the bulls are gaining momentum but still have some work to do. The Relative Strength Index (RSI) has turned flat above its midline, while the Moving Average Convergence (MACD) histogram exhibits more oversized green bars. However, on the broader scale, the pair remains below the 100 and 200-day Simple Moving Averages (SMA), suggesting that the bears have the upperhand in the long term.

Support levels: 0.8673 (20-day SMA), 0.8650, 0.8600.
Resistance levels: 0.8780, 0.8800, 0.8825.

USD/CHF Daily chart