USD/CHF: Can Powell, Core PCE Price Index Push the Breakout?

The USD/CHF is up 0.13% as the price action seeks new direction. The pair lost ground in Thursday’s trading session, despite the data showing a less-than-expected contraction in the US economy for the 2nd quarter. The preliminary GDP data indicated that the US economy contracted by 0.6% in the quarter under review, which was less than the 0.7% contraction predicted by polled economists. It was also less than the 0.9% contraction seen in the first quarter. 

However, the losses on the USD/CHF were capped as some analysts are hesitant to make dire predictions on the economy, despite the second successive quarterly contraction fitting the definition of a recession. For example, in a CNBC interview on Wednesday, economist and Nobel Laureate Richard Thaler opined that he did not see anything resembling a recession, as there was a high number of vacancies and record low unemployment, hallmarks of a strong economy. 

The fundamental trigger for price action on the USD/CHF on Friday will come from the Fed Chair’s address at the Jackson Hole symposium. But before the Fed’s core inflation barometer, the Core PCE Price Index (m/m), will be released. The market expectation is for a drop from the previous figure of 0.6% to 0.2%. 

USD/CHF Forecast

The break of the falling wedge’s upper border by the 22 August candle and subsequent violation of the 0.96296 resistance has turned this price level into new support. The bulls must build on the intraday uptick to test the 0.97203 resistance (4 May/8 June low). A break of this price level makes the 0.97957 resistance (3 May/8 July highs) the new upside target. If the bulls uncap this resistance, the path toward 0.98905 (5 May and 14 July highs) becomes clear. This barrier must give way if the measured move is to attain completion at price parity. 

On the other hand, a breakdown of the 0.96296 support invalidates the bullish outlook, opening the door toward the 0.95496 support level as the initial downside target. 0.94635 (20 April and 2 August lows) becomes the new target to the south if there is further price deterioration. 

USD/CHF: Daily Chart