• USD/CHF is sharply higher on Tuesday and has returned to its 200DMA at 0.9150.
• Strong Swiss Retail Sales and inflation numbers have not prevented the Swiss franc from selling off.
• USD/CHF traders are focused on key risk events in the US as the next key driver.

USD/CHF is up sharply on Tuesday, with the Swiss franc having depreciated 0.6% on the session versus the buck. That translates to a roughly 0.6% rebound for USD/CHF on the day from Asia Pacific session lows nuder 0.9100 to current levels around 0.9150, where, incidentally, the 200-day moving average resides. Indeed, the key long-term moving average may well halt USD/CHF’s rebound in its tracks, though the currency pair hasn’t paid too much attention to the level in recent days.

Tuesday’s upside marks a sharp reversal of the trend towards gradual depreciation seen over the last few weeks; since the start of October, USD/CHF has dropped from above 0.9300 to before printing lows under 0.9100 on Monday. The rebound to 0.9150 doesn’t yet mark a trend reversal, however, as the key downtrend that has been suppressing the price action in recent weeks remains intact.

Strong Swiss data

CHF weakness on Tuesday flies in the face of strong Swiss economic data released during Tuesday’s European morning; firstly, the October Consumer Price Inflation report was much hotter than expected with the MoM rate of CPI coming in at 0.3% versus forecasts for 0.1% and the YoY rate rising to 1.2% from 0.9% in September, more than the expected rise to 1.1%. The September Retail Sales report also showed an acceleration in consumer spending, with the YoY rate of sales growth rising to 2.5% from an upwardly revised 0.8% in August.  

Rest of the week

Looking ahead to the rest of the week; state-side events will likely be the dominant driver of price action, with the most notable events the release of the ISM Services PMI at 1400GMT, the release of the Fed’s latest monetary policy decision at 1800GMT and then the post-meeting press conference with Fed Chair Jerome Powell at 1830GMT on Wednesday, followed by the release of the October Labour Market report at 1230GMT on Friday. FX strategists have argued in recent weeks that if the Fed does continue to signal more hawkish policy guidance/tone, then the currencies most at risk of depreciating versus the US dollar are those where the central banks are substantially behind the Fed in terms of monetary normalisation.

That means the Swiss franc, given that, at present, there is no end in sight to the SNB’s ultra-accommodative stance which is at this point now mainly geared around trying to fight long-term CHF strength. Should the Fed deliver hawkish undertones and US jobs data come in strong, this may trigger a break above the recent downtrend and send USD/CHF back towards 0.9200.