The U.S. dollar index stabilized at a two-week high in yesterday's session ahead of U.S. inflation data.
This week's data shows a resilient U.S. economy, easing some concerns about the coming recession. However, this increased expectations that the Federal Reserve System (Fed) would continue its tight policy.
On Thursday, at a central bank meeting in Madrid, Fed Chairman Jerome Powell confirmed the probability of at least two more rate hikes by the end of the year.
Now investors estimate the probability of a further monetary tightening in July at 87%, according to the CME Fedwatch tool.
Market participants are waiting for Personal Consumption Expenditures (PCE) data for May. Meanwhile, the baseline PCE is expected to be 4.7% year-on-year, which is significantly higher than the 2% target.
A series of strong news is also expected in Europe.
Eurozone inflation indicators will be released at 9:00 GMT. The annual consumer price index is expected to fall to 5.6%. However, June inflation in Germany exceeded expectations and amounted to 6.8%. ING economists pointed to a possible difference between consumer prices in the region. This could lead to disagreements about optimal interest rate changes by the European Central Bank (ECB). Confirmation of this forecast may affect the Swiss franc (CHF), which has a correlation to the European currency (EUR).
The USDCHF currency pair is in a corrective rectangular corridor for two weeks on the hourly timeframe. The price rebounded from the upper boundary of the range.
At the same time, the pair's quotes inside the corridor formed an uptrend. The price also rebounded from the slope resistance. This indicates that technical resistances are strong and that the price tends to move towards the supports.
The Relative Strength Index (standard values) shows a divergence, which gives a leading signal for the possibility of a short-term trend change.
Signal:
Short-term prospects for the USDCHF pair are to sell.
The target is at the level of 0.8920.
Part of the profit should be fixed near the level of 0.8955.
The stop-loss is at the level of 0.9025.
Bearish trend has a short-term character, so the volume of trade should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
