USD/CHF drops below 0.9700 despite soaring hawkish Fed bets, US Inflation in focus

• USD/CHF has slipped below the round-level support of 0.9700 amid a decline in the Swiss jobless rate.
• The Fed is set to hike interest rates further at the cost of growth prospects.
• Next week, investors’ entire focus will remain on the US inflation data.

The USD/CHF pair has displayed a perpendicular fall after surrendering the critical support of 0.9760 on Thursday. The asset has slipped below the round-level support of 0.9700 and is not displaying any sign of bullish reversal yet, therefore more weakness is on cards. The major turned bearish this week after multiple attempts of overstepping the crucial resistance of 0.9860. The downside move is expected to escalate further to near 0.9600.

It is worth noting that the decline in the USD/CHF pair is significantly higher than the decline in the mighty US dollar index (DXY). This indicates that the Swiss franc bulls have strengthened extremely amid a decline in Swiss Unemployment Rate data. On Thursday, the Swiss jobless rate landed at 2.1%, lower than expectations and the prior release of 2.2% on a monthly basis.

Meanwhile, the DXY is expected to deliver a surprise movement after a hawkish speech from Federal Reserve (Fed) chair Jerome Powell. Fed Powell’s O&A at the Cato Institute focused more on bringing price stability to the US economy. The inflation rate of 8.5% is huge and is firmly impacting households. Also, the Fed is prepared for softening demand as higher interest rates will squeeze out liquidity from the economy drastically.

Next week, the major trigger will be the release of the US Consumer Price Index (CPI) data. A decline is expected in the inflationary pressures led by soaring interest rates and declining gasoline prices. For July, the headline CPI landed at 8.5%.