US dollar forecast: USD/JPY and USD/CHF in focus | Forex Friday
The US dollar remained on the front foot on Friday, with USD/JPY testing the 160 handle, USD/CHF climbing towards a new 2026 high and EUR/USD falling for a fourth straight day. A marginal miss on headline producer prices did little to dent the greenback, not least because annual PPI is now running at its fastest pace since November 2022. With a December rate hike fully priced in, the risk to the near-term US dollar forecast remains tilted to the upside.
- Sticky US inflation and a hawkish Federal Reserve continue to underpin the greenback.
- USD/JPY is back at 160, where the Bank of Japan has intervened before.
- US retail sales, Nvidia's results and the FOMC minutes are next week's big tests.
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Hot inflation keeps the Fed on the front foot
The US dollar staged a strong rally this week, helped by stronger-than-expected inflation data and a notably hawkish turn in Federal Reserve rhetoric. Fed Governor Christopher Waller, for example, suggested that further monetary tightening is necessary and indicated he was open to a larger 50-basis-point move.
Sticky inflation therefore strengthens the case for the Fed to hike rates and maintain a restrictive stance for longer. For now, the path of least resistance for the dollar remains to the upside.
PPI miss does little to dent rate hike bets
Friday's producer price data offered only modest relief. Wholesale prices rose 0.3% month on month in October, slightly less than the 0.4% forecast, but on an annual basis PPI surged 6.5%, the biggest increase since November 2022.
Put another way, a small monthly miss is hardly evidence that price pressures are fading. Markets continued to fully price in an interest rate hike of at least a quarter of a percentage point when the Fed meets in December, which leaves little reason for dollar bulls to step aside just yet.
A busy week ahead for the FX markets
The calendar gets busier from Monday, when Canadian CPI is released and the Fed Chair is due to speak. US retail sales follow on Tuesday at 13:30 GMT. After stronger prints in the last couple of months, a hat-trick of solid reports would further strengthen the case for more Fed rate hikes and keep the dollar supported.
Later the same day, Nvidia reports after the US close at 21:20 GMT. We don't normally single out company earnings, but given the sheer size of Nvidia and its weight in the major indices, it is hard to ignore. Analysts expect earnings per share of $2.49 on revenue of $108.99bn, and following Jensen Huang's resignation as CEO, interim CEO and CFO Colette Kress is set to lead the call. The results could jolt chipmakers and the wider US market. The FOMC minutes then follow later on Wednesday.
With the macro backdrop set, let's have a look at the charts.
Technical USD/CHF forecast and key levels to watch
From a technical analysis point of view, USD/CHF has broken above the high formed on 28 October, when the pair printed an inverted hammer candle at the 0.8310/15 area. That level was taken out in the post-CPI rally and has held since, which keeps the bulls in control. The previous highs around 0.8395 are now being tested. Clear that and the next hurdle could be 0.8500, which is now the key upside objective. Just below it sits 0.8468, where the 127.2% Fibonacci extension of the most recent downswing converges.
Technical USD/JPY forecast and key levels to watch
The USD/JPY looks the most interesting of the dollar pairs. It has cleared several resistance levels this week, including 158.70-159.00, an area of prior resistance where the 200-day moving average converges, and has held above it. The pair is now testing the 160.00 handle, where the Bank of Japan has previously intervened in the FX markets. There is no evidence of that so far, but intervention cannot be ruled out in the days and weeks ahead if the rally extends.
Above 160.00, the next big level of potential resistance is not seen until around 163.00, where the previous selling started, leaving a gap that could be filled quickly should the dollar remain supported. Key support is now the former resistance between 158.70ish and 159.00. Below that, things would start to look bearish once more, with 157.25, the last low before the latest rally, the line in the sand.
Frequently asked questions
Why is the US dollar rising?
Stickier-than-expected inflation and an increasingly hawkish Federal Reserve are driving the dollar higher, with markets now braced for further tightening.
Will the Fed raise rates in December?
Markets fully price a hike of at least 25 basis points at the December meeting.
Will the Bank of Japan intervene in USD/JPY?
The 160 handle is where the Bank of Japan has stepped in before, so the risk rises the longer USD/JPY trades around it. There has been no sign of action so far.
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