USD/CHF trims losses after strong US Retail Sales

• The USD/CHF declined towards 0.8850 and then stabilised at 0.8885, seeing mild losses.
• PPI gave further evidence of inflation cooling down, but positive Retail Sales warn markets.
• Investors are still confident that the Fed won’t hike in December.

The USD/CHF observed measured downward movements on Wednesday while trading near 0.8885, with the trajectory of the pair being set by soft US PPI and strong Retail Sales from the US from October.

On the data front, the US Producer Price Index (PPI) in October demonstrated a lower-than-anticipated year-on-year increase of 1.3%, failing to meet the projected rise of 1.9%. The Core PPI in October also fell short of expectations, registering a year-on-year figure of 2.4% instead of the projected 2.7% and declining from the previous reading of 2.7% in September. On a positive note, October's Retail Sales performed better than expected, exhibiting a month-on-month decline of 0.1%, better than the projected 0.3% decrease. 

As a reaction, the US Dollar recovered, trimming part of Tuesday’s losses driven by a rise of US Treasury yields, with the 2-year rate rising to 4.91%, while the 5-year and 10-year rates increasing to 4.52% and 4.53%, respectively. In line with that, those rates may be anticipating that Retail Sales flashed a warning that the Federal Reserve (Fed) could take those figures as a threat to the progress on inflation, which could justify further tightening. It's worth noticing that on Tuesday, markets cheered that the Consumer and Core Consumer Price Index (CPI) cooled down and now bet on sooner rate cuts by the Fed. For the December meeting, a pause is now priced in.

USD/CHF levels to watch

Based on the daily chart, the USD/CHF holds a bearish technical outlook, with indicators reflecting that the sellers are seizing control. The Relative Strength Index (RSI) printed a downward slope below its middle point, while the Moving Average Convergence (MACD) histogram lays out rising red bars.  

In the larger context, the sellers pushed the pair below the 20,100 and 200-day Simple Moving Averages (SMAs), suggesting that the bears are now in charge.

Supports:  0.8870, 0.8850,0.8830.
Resistances: 0.8900 (100-day SMA), 0.8950, 0.9000 (20 and 200-day SMA convergence).

USD/CHF daily chart