USD/CHF dropped to a fresh cycle low post-US Retail Sales data

• USD/CHF fell to a low of 0.8555, its lowest level since January 2015.
• US Retail Sales expanded in June but at a slower pace than expected.
• Investors are confident that the Fed won’t hike past the July meeting.

On Tuesday, the USD/CHF slid to its lowest level since January 22, 2015, amid soft Retail Sales figures from the US from June. Following soft inflation and economic data figures from the US, investors are refraining from betting on rate hikes by the Federal Reserve following the upcoming July meeting, weakening the USD.

Dovish bets on the Fed weaken the USD. Eyes on Swiss Trade Balance Data

The US Census Bureau reported that the Retail Sales from June increased by 0.2%, missing the 0.5% expected and below the previous 0.5% monthly increase. Sales excluding the Automobile Sector also expanded but below the expectations at 0.2% vs the 0.3% expected by the Retail Sales Control Group, came in strong at 0.6% vs the 0.3% decline expected. In addition, Industrial production surprisingly decreased by 0.5% MoM while markets expected the figures to remain unchanged regarding the previous month.

As economic activity weakens, the US markets expect the Federal Reserve to be taken off the pressure to continue hiking past July. For the next week’s meeting, 25 basis points (bps) is already priced in, but the odds of a hike in the rest of 2023 dropped to nearly 20% from last week’s 40%.

On the Swiss side, the week's highlight will be Trade Balance data from June, to be reported early in Thursday’s European session.

USD/CHF Levels to watch

According to the daily chart, the short-term USD/CHF outlook is bearish. However, indicators show oversold conditions, with the Relative Strength Index (RSI) standing below conditions and the Moving Average Convergence Divergence (MACD) printed a lower red bar, suggesting that an upwards correction may be on the horizon as bears are losing steam.

Support levels: 0.8555,0.8550, 0.8375.
Resistance levels: 0.8600,0.8670, 0.8700.

USD/CHF Daily chart