USD/CHF hovers around 0.8780 subdued ahead of central bank bonanza

• USD/CHF price action is subdued, as the US and Switzerland will feature monetary policy decisions by their central banks.
• US inflation is expected to remain at around current levels ahead of the Fed’s decision.
• The SNB is projected to keep rates unchanged as inflation remains below the central bank’s target.

The USD/CHF commences the week virtually unchanged, losing 0.08%, amid a busy week for the United States (US). The release of US inflation data and the Federal Reserve monetary policy decision would be the two main drivers of price action in the financial markets. Nevertheless, as usually happens in a Fed week, price action is constrained, with the major exchanging hands at 0.8785 after hitting a high of 0.8816.

USD/CHF at the mercy of US inflation and Fed/SNB decisions

On Tuesday, the US Bureau of Labor Statistics (BLS) will update inflation data, which is expected to remain at around current levels, ahead of the Fed’s decision. Headline inflation in November is expected to dip on an annual basis from 3.2% to 3.1%, while core inflation would likely remain unchanged at 4%.

The data is not expected to move the needle amongst Federal Reserve officials, which have become more neutral-biased as inflation continues to slow down. Nevertheless, the Producer Price Index (PPI) would be released on Wednesday early morning, ahead of the Fed’s decision.

If the Fed struck a hawkish hold, that could trigger another repricing for interest rate cuts for the next year. After last week’s Nonfarm Payrolls report, market participants priced out one rate cut for the upcoming year.

On the Switzerland front, the Swiss National Bank (SNB) is expected to keep rates unchanged at 1.75% on Thursday. Traders should remember that the SNB only meets four times a year, and as inflation slowed, the message would likely lean toward the neutral side.

USD/CHF Price Analysis: Technical outlook

The major remains downward biased unless USD/CHF bulls lift the spot price and reclaim the latest cycle low at around 0.8887, the October 24 daily low. Once that level is taken out, along with the 100-day moving average (DMA) at around 0.8901, expect a test of the 0.8934/47 area the confluence of the 50 and 200-DMAs, respectively, before climbing to 0.9000. On the other hand, further downside is seen below the December 4 swing low of 0.8666.