USD/CHF trades near 0.8112, holding above its 100- and 200-hour moving averages as buyers keep a narrow edge in a choppy range. Wednesday's US inflation report and a Reuters poll of bond strategists both point to a dollar still searching for direction against the franc.
The dollar-franc pair extended into a swing area between 0.81079 and 0.81195 on Tuesday, touching a session high of 0.8120 before easing back toward 0.8112. Holding above the 100-hour moving average at 0.80956 and 200-hour average at 0.80902 keeps the near-term bias tilted toward buyers.
Next hurdle sits above 0.8120
Clearing that high would open the door toward the 0.8153 area, the upper end of the broader range that has contained USD/CHF since mid-June, with the late-July highs near 0.82063 as the next target beyond that. Since mid-June, however, the pair has mostly traded between approximately 0.8029 and 0.8153, crossing above and below its moving averages repeatedly. A close back below both the 100- and 200-hour averages would shift the technical bias back toward sellers.
CPI report looms as the next catalyst
Wednesday's US CPI release at 8:30 AM ET will test that bullish bias. Headline inflation is expected to rise 0.1% month-over-month, with the core measure forecast to increase 0.2%. On a year-over-year basis, headline inflation is expected to ease to 3.4% from 3.5%, while core inflation is forecast to tick down to 2.5% from 2.6%.
Traders are pricing roughly a 50% chance of a September Fed rate hike heading into the report, so a hotter-than-expected print would likely add to dollar buying, while a softer one could unwind some of the currency's recent gains.
Treasury yield outlook keeps rate-hike bets alive
A Reuters poll of bond strategists conducted August 6-11 found that respondents still expect the 10-year Treasury yield to fall to 4.50% within three months and to 4.34% in a year, even as financial markets price out Fed rate cuts entirely and bet on at least one hike this year. Yet 82% of respondents said the 10-year yield is more likely to land above their forecast than below it in three months, reflecting wavering conviction that yields will actually decline.
The 10-year yield sits at an 18-month high of nearly 4.73% after a selloff pushed it up nearly 80 basis points since the US-Iran war began in late February, as higher oil prices stoked fears that inflation will stay above the Fed's 2% target. According to Vanguard's Alex Payne: "Our base case is for lower 10-year yields."
Sources: Investing.com, InvestingLive
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