CPI Shock Sends USD/CHF Plunging: Fed's 50bp Cut Dreams Evaporate

USDCHF lost its shine after the US CPI. It hits an intraday low of 0.79482  and is currently trading around 0.79541.

Released the same day, US inflation numbers revealed acceleration to a nine-month high of 2.9% year-over-year in August, with monthly CPI rising 0.4% driven by ongoing shelter expenditures, growing energy prices, and general service industry demands. At 3.1% yearly, core inflation stayed stubbornly high, well beyond the Federal Reserve's 2% target, much complicating next week's Fed meeting and confirming assumptions for Rather than the more forceful 50bp cut some had predicted, a measured 25 basis point rate cut. With the ECB seeming close to the end of its easing cycle and the Fed starts rate cuts amid Continuous inflation presents problems that could help the euro against the dollar as central bank paths diverge

Technical Analysis Points to Further Downside

The pair is trading below   55-EMA, below the 200 EMA, and 365 EMA on the 4-hour chart, indicating a weak trend. The immediate resistance is at  0.8000; any break above targets  0.8070/0.8090/0.8135/0.8170/0.8215/0.8250.

Support Levels and Potential Declines

On the downside, near-term support is around 0.7920; any violation below will drag the pair to 0.7920/0.7860/0.7800.

Indicators (1-hour chart)

CCI (50) - Bullish

Directional Movement Index -  Bullish

Trading Strategy Recommendation

It is good to sell on rallies around 0.7968-70 with SL around 0.8010 for a TP of 0.7860.