Usdchf rise reflects mixed outlook with rate cut and economic optimism

USDCHF Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.94%	83.6 Pips
Week to-date	1.03%	92.2 Pips
December	2.11%	186.2 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD GDP annual rate
Fri 01:30 PM USD PCE Price Index, excluding food and energy (12-mth)

What happened lately

The U.S. Federal Reserve recently decided to reduce the Federal Funds Rate to 4.5%, down from the previous 4.75%. This signals a new phase, where further interest rate cuts will be approached cautiously. Despite this immediate reduction, projections for interest rates in the coming years indicate certain optimism. For the third year, the interest rate projection increased to 3.1% from 2.9%, while the longer-term projection also rose to 3% from 2.9%. The rate for the first year exceeded its forecast by growing to 3.9% from 3.4%, and the second-year rate rose from 2.9% to 3.4%. However, the projection for the current period remained unchanged at 4.4%. This combination of current reduction and future optimism suggests a mixed but measured approach towards economic growth and stability.

In the housing sector, November’s data revealed a slight decline in housing starts to 1.289 million from October’s revised 1.312 million. Conversely, building permits saw a notable increase to 1.505 million from the revised 1.419 million, indicating positive future construction activities. Industrial production showed a modest improvement, with a change from -0.3% in October to -0.1% in November, suggesting a recovery from earlier declines. Retail trade indicators for November were positive, with overall monthly retail trade rising to 0.7% from 0.4%, while excluding automobiles, it held steady at 0.2%. This stability and growth in retail suggest consumer confidence remains strong.

The reaction of USDCHF to these developments is crucial for financial markets. On Wednesday, the USDCHF rose by 0.94% to 0.90096. The interest rate cut might initially weaken the USD, but the projections and economic improvements could bolster its strength over the medium term. Upcoming high-impact events like the U.S. GDP annual rate and the PCE Price Index could further influence the USDCHF pairing, dependent on their results. Given recent data, investors and forex traders will likely monitor U.S. economic indicators closely for signs of continued recovery or shifts in economic conditions.

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What can we expect from USDCHF today?

USDCHF on Wednesday rose 0.94% to 0.90096. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCHF looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 0.90476 with break above could target R2 at 0.90857 or figure level area. While towards the downside, we are looking at daily low of 0.89171 as an important support. Break below this level could weaken the current bullish momentum. A break above 0.90204 may suggest continuation after recent positive movement.

For the week to-date, take note that USDCHF is bullish as the pair continued to trade higher and is up by 1.03% over the past few days.

Key levels to watch out:

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