USDCHF: the franc is under pressure due to easing inflation

The USDCHF rate slightly declines on Tuesday. More details in our analysis for 22 October 2024.

USDCHF forecast: key trading points

• Markets predict Trump’s potential victory, which may drive up US inflation, adding pressure on the franc
• Expectations of monetary policy easing by the Swiss National Bank support the rise in the USDCHF pair
• USDCHF forecast for 22 October 2024: 0.8717 and 0.8740

Fundamental analysis

The USDCHF rate remains below the 0.8665 resistance level, close to its two-month low. The franc is under pressure from a strengthening US dollar amid anticipation of the US presidential election and a potentially softer Fed monetary policy cycle following a series of strong US economic data.

A batch of positive economic statistics from the US prompted comments from Federal Reserve officials. Minneapolis Fed President Neel Kashkari stated that long-term interest rates may remain higher than in the past. Dallas Fed President Lorie Logan recommended a gradual reduction of interest rates by the Federal Reserve while emphasising the need to remain flexible and ready to adjust monetary policy rapidly if economic conditions change.

According to the CME FedWatch Tool, the likelihood of a 25-basis-point Federal Reserve rate cut next month is 88.5%. For comparison, it was 50.0% a month ago when investors were considering the possibility of a more substantial 50-basis-point rate cut.

Meanwhile, easing inflation in Switzerland heightened expectations that the Swiss National Bank may lower interest rates at its December meeting. Inflation fell to a three-year low of 0.8% in September, down from 1.1% in August. According to today’s forecast, this easing in inflationary pressure may contribute to further growth in the USDCHF pair.

USDCHF technical analysis

The USDCHF H4 chart shows that the market has formed a consolidation range around 0.8637. The price is expected to break above the upper boundary of this range and rise to 0.8717 today, 22 October 2024. After reaching this level, the price could decline to at least 0.8670 (testing from above). Subsequently, the growth wave might continue to the local target of 0.8740. After this, a more substantial correction in the USDCHF rate is likely, with a possible target of 0.8570.

Summary

The USDCHF rate remains under pressure amid expectations of policy easing by the Swiss National Bank and the strength of the US dollar. The strength of the US currency is supported by robust US economic data and Trump’s potential victory in the election. Technical indicators in today’s USDCHF forecast suggest a potential growth wave towards the 0.8717 and 0.8740 levels.