Usdchf drops amid mixed us economic outlook and fed rate cut

USDCHF Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.14%	-12.6 Pips
Week to-date	0.77%	68.6 Pips
December	1.84%	162.6 Pips

Upcoming key events (London Time)

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

What happened lately

The U.S. economic data presents a mixed picture of the economy’s performance. The Manufacturing Business Outlook Survey for December showed a significant decline, decreasing to -16.4 points from -5.5 points, indicating a contraction in the manufacturing sector according to the Philadelphia Fed. However, other economic indicators such as the GDP annual rate showed positive momentum, increasing to 3.1% in Q3 from 2.8% in Q2, according to the Bureau of Economic Analysis. The PCE excluding food and energy prices slightly increased to 2.2% in Q3 from 2.1% in Q2. Meanwhile, the U.S. Initial Unemployment Insurance Claims dropped significantly to 220K in the week ending December 14th, from a previous figure of 242K, as reported by the Department of Labor, suggesting a slightly improved labor market. The Federal Reserve, in its latest decision, revised the Federal Funds Rate down to 4.5% from 4.75%, showing a more cautious monetary stance moving forward. Interest rate projections for upcoming years show marginal increases, with the 1st year projection increasing to 3.9%, the 2nd year to 3.4%, and longer-term rates to 3%. The housing market showed mixed signals with housing starts decreasing to 1.289 million in November, down from a revised 1.312 million in October, whereas building permits increased to 1.505 million, showing some strength in housing construction intentions.

USDCHF’s performance, which dropped by 0.14% to 0.89860, can be understood in the light of these economic indicators and monetary policy adjustments. Generally, the mixed outlook from the U.S. economy with a contraction in manufacturing, alongside steady GDP growth and improved unemployment claims, presents a complex landscape. The Federal Reserve’s decision to decrease interest rates may also exert downward pressure on the U.S. Dollar due to reduced attractiveness of dollar-denominated assets. This could contribute to downward movements in the USDCHF rate as the U.S. Dollar depreciates, simplifying as traders weigh the potential impacts of these economic indicators and interest rate cuts. Upcoming high-impact events like the USD PCE Price Index release may further influence the pair, setting the stage for fluctuations based on how the actual figures compare to market expectations, thus impacting traders’ sentiment towards USDCHF pricing accordingly.

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What can we expect from USDCHF today?

USDCHF on Thursday dropped -0.14% to 0.89860. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCHF looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at S1 0.89521 with break below could see further selling pressure towards S2 at 0.89181. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.90186 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.89514 would indicate selling pressure.

For the week to-date, take note that USDCHF is bullish as the pair continued to trade higher and is up by 0.77% over the past few days.

Key levels to watch out:

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