USD/CHF prods three-day winning streak below 0.8800 but lacks momentum, focus on US inflation

• USD/CHF seesaws around weekly top amid pre-CPI inaction, prints the first daily loss in four.
• US Dollar pares weekly gains as market sentiment improves despite mixed updates from US, China.
• US inflation eyed for clear directions as market players heavily bet on Fed policy pivot.

USD/CHF bears lack momentum as the Swiss Franc (CHF) pair fails to extend the first daily loss in four near 0.8665-70 heading into Thursday’s European session. That said, the quote’s latest pullback can be linked to the US Dollar’s retreat ahead of the all-important inflation data, as well as a shift in the market’s sentiment despite the risk-negative headlines surrounding China.

That said, US Dollar Index (DXY) remains depressed near 102.45 after snapping a two-day uptrend the previous day. In doing so, the Greenback’s gauge versus the six major currencies justifies the market’s cautious mood ahead of the US inflation data, as well as a light calendar.

It’s worth noting that the mildly bid S&P500 Futures and the Treasury bond yields suggest the market’s cautious optimism despite headlines suggesting trade wars between the US and China, as well as looming concerns of Sino-UK geopolitical tension.

Recently, Financial Times (FT) came out with the news suggesting that UK Prime Minister Rishi Sunak is weighing whether to follow US President Joe Biden in restricting outbound investment into the Chinese tech sector, including artificial intelligence, chips and quantum computing. Before that, US President Joe Biden signed the much-awaited bill that allows the US Treasury Department to prohibit or restrict certain US investments in Chinese entities, per Reuters.

China's Commerce Ministry showed grave concerns and marked the right to take measures against the US ban on technology investment. However, such an issue was long discussed and the announced steps are slightly lenient than originally planned, which in turn allowed the markets to remain cautiously optimistic.

On a broader scale, hopes of witnessing an end to hawkish monetary policy in the US, mainly due to the recently downbeat US employment data and downbeat early signals for today’s Consumer Price Index (CPI) for July, seem to underpin the USD/CHF fall. That said, the US CPI is expected to improve to 3.3% YoY versus 3.0% prior and an upbeat outcome can defy concerns that the Fed is near its peak rate, which in turn may recall the pair buyers.

Also read: US CPI Preview: Forecasts from 10 major banks, monthly pace should hold at 0.2%

Technical analysis

Unless providing a daily closing below the two-week-long horizontal support around 0.8700, the USD/CHF bulls stay on the way to challenge a downward-sloping resistance line from November 2022, close to 0.8825 by the press time.