USD/CHF retraces to key support amid softer US CPI data

• USD/CHF tests round-level support at 0.8400 after softer-than-expected US CPI data for April.
• The US Dollar Index (DXY) retraces to 101.30, pressured by cooling inflation and fading trade optimism.
• Swiss Franc remains firm against major peers, supported by a cautious market tone.

The USD/CHF pair retraces towards the critical round-level support of 0.8400 during the North American session on Tuesday. The US Dollar (USD) faced selling pressure following the release of the United States (US) Consumer Price Index (CPI) data for April, which revealed that inflation grew at a moderate pace, coming in below market expectations. According to the US Bureau of Labor Statistics (BLS), the headline CPI rose 2.3% year-on-year in April, down from 2.4% in March and missing the 2.4% forecast. The core CPI, which excludes volatile food and energy components, remained steady at 2.8%, aligning with analyst estimates.

The US Dollar Index (DXY), which gauges the performance of the USD against six major currencies, corrected to near 101.30 from the monthly high of 102.00 seen on Monday. Traders have pared back Fed dovish bets for the July meeting, with the CME FedWatch tool showing a 61.4% probability of interest rates remaining steady in the current 4.25%-4.50% range. Despite this, broader concerns over a cooling US economy and lingering US-China trade uncertainties have kept the Greenback under pressure.

The Swiss Franc (CHF), meanwhile, trades higher against most major peers, except antipodeans, as the currency benefits from its safe-haven status amid global economic uncertainties. The pair remains cushioned near the horizontal support from the September 6 low of 0.8375, a former major resistance level.

Technical Analysis

USD/CHF hovers near critical support at 0.8400, struggling to regain upside momentum. The pair has climbed above the 20-day Exponential Moving Average (EMA), currently trading around 0.8326, signaling a potentially stronger bullish trend if sustained. The 14-day Relative Strength Index (RSI) has rebounded to the 60.00 level, suggesting building positive momentum, though a confirmed breakout above this level would be needed for a sustained rally.

Key resistance levels include the psychological 0.8500 mark, followed by the April 10 high of 0.8580 and the April 8 high of 0.8611. On the downside, a decisive break below 0.8375 could expose the May 7 low of 0.8186, followed by the deeper support near the April 11 low of 0.8100 and the April 21 low of 0.8040.

With traders cautious ahead of more US economic data and Fed guidance, USD/CHF remains in a fragile recovery, closely tracking shifts in risk sentiment and global macroeconomic indicators.

Daily Chart