- During the trading session on Thursday, we saw the US dollar test the crucial 0.80 CHF level, an area that of course has been important once.
- All things being equal, this is a market that is trying to figure out where we are going next.
- This does make a certain amount of sense considering that volume will be down this time of year, but I also recognize that this is a pair that typically moves somewhat slowly to begin with.
US Dollar Direction
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If you can get the direction of the US dollar correct, it can give you an idea as to where most forex pairs are going to go. That generally is the case with this pair as well, unless of course we have a major “risk off” move in the markets, then you could see this pair still dripped lower, because one of the few currencies out there that is considered to be a safety currency, even more so than the US dollar.
The market has been very clear levels to pay close attention to, with the 0.80 level being the most obvious one, but we also have the 0.81 level above as resistance. If we can break above there, then it would show a lot of US dollar strength overall. If we break down below the 0.80 level, then it’s likely that we could drop to the 0.79 level. The 0.79 level is the floor in the market at the moment, and we need to pay close attention to any move that heads toward that direction, because a violation of that to the downside would probably see the US dollar weakness everywhere else.
Core PCE Price Index
The Core PCE Price Index month over month comes out on Friday, anticipated to be 0.3%. This is one of the Federal Reserve’s favorite gauges of inflation, and therefore it will have a potentially significant influence on where we go next. However, I think it’s a generally accepted fact that the Federal Reserve is likely to cut rates in September, and perhaps again in December. However, the interest rate differential between the 2 currencies still favors the US dollar. At this point, choppy sideways action makes the most sense.
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