USD/CHF plummets following PCE data

• USD/CHF took a downturn in Friday’s session, plummeting to 0.9016, after slightly rising to 0.9070 earlier in the session.
• Following US inflation figures coming in line with market expectations, markets may be anticipating a less aggressive Fed stance.
• The potential for rate cuts in September has increased slightly.

The USD/CHF pair is trading lower following the release of the latest US inflation data on Friday. This change came in despite inflation figures, signaled by the Personal Consumption Expenditures (PCE) Price Index, holding steady at 2.7% YoY in April which matched market expectations.

On the other hand, the Core PCE Price Index, excluding volatile food and energy prices, observed a 2.8% YoY rise, consistent with the analyst's estimate. What seems to be weakening the USD is the lower-than-expected monthly variation of 0.2% which was below the 0.3% expected. The odds for easing by the Federal Reserve (Fed), however, remained mostly unchanged, except for a slight increase in the likelihood of the first-rate cut occurring in September. Those probabilities remain low for June and July.

USD/CHF technical analysis

In the daily analysis, the Relative Strength Index (RSI) has plunged into negative territory, indicating a momentum shift that favors sellers for the time being. Simultaneously, the Moving Average Convergence Divergence (MACD) displays red bars, pointing toward a growing bearish momentum.

USD/CHF daily chart

The USD/CHF seems to have lost some of its sheen from earlier in the week, when it stayed above the 20, 100, and 200-day Simple Moving Averages (SMAs). This previous positioning was a strong indicator of a bullish trend, with market dominance leaning towards buyers. However, following the recent downturn, the pair has lost its position above the 20-day SMA at 0.9095, indicating a less positive short-term outlook.