USDCHF Extend Losses Amid Weak US Retail Sales

Fundamental Analysis

* Retail Slump: The Swiss Franc continues to strengthen against the dollar following the release of weak U.S. retail sales data on Tuesday. U.S. retail sales rose less than expected in May, increasing by only 0.1% after a downwardly revised 0.2% drop in April, falling short of the 0.3% forecast. The report attributed the slower growth to reduced sales at service stations due to lower gasoline prices and a decline in automobile prices. Sluggish consumer spending dampens growth prospects and heightens market speculation for Federal Reserve rate cuts in the September meeting. Conversely, the Swiss Franc received additional support from an upward revision of Switzerland’s 2024 growth forecast by the Swiss Government. According to the State Secretariat for Economic Affairs (SECO), Switzerland’s GDP growth rate is now projected to reach 1.2% in 2024, up from the 1.1% predicted in March.

Technical Analysis

* Technical Breakout: USDCHF was traded lower following recent breakout below the previous support level 0.8915. MACD which illustrate ongoing bearish momentum signal with the bearish market structure suggest the pair to further extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 0.87600. Conversely, a potential correction is also to be expected and the price could head back towards 0.89150.

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Potential Risks

Moving ahead, the market’s focus will shift to the Swiss National Bank’s (SNB) interest rate decision, scheduled to be announced on Thursday. The SNB faces a tough decision, as Swiss exports have gained competitiveness in global markets while imports have become more expensive due to the weak Swiss Franc, potentially reigniting price pressures. However, inflation has remained below 2% year-on-year since June 2023.

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Monitoring

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