Fundamental Overview
The USD has been weak almost across the board since the NFP report as the softer than expected data triggered a quick dovish repricing and a change in stance for many Fed members.
The market is pricing 57 bps of easing by year-end compared to just 35 bps before the NFP release. It’s highly likely that more benign data will see Fed Chair Powell opening the door for a cut in September at the Jackson Hole Symposium.
The focus now turned to the US CPI report. We saw some dollar strength yesterday which could have been hedging activity into the risk event. The recent Fedspeak suggests that a rate cut in September might be unavoidable, so we might need very hot inflation data to change their mind (and of course a good NFP report in September).
On the CHF side, we haven’t got anything new in terms of monetary policy as the SNB is now in a long pause. The latest Swiss CPI showed a slight improvement in inflation although it’s not important as the central bank will not hike rates for a long time. The market doesn’t expect the SNB to cut anymore.
There’s some focus at the moment on the 39% tariffs that the US slapped on Switzerland. That is likely to be resolved in the near future with the rate being set between 10-20% as we’ve seen for most other countries.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF is trading above the key support zone around the 0.8050 level and the major trendline. The buyers will likely continue to step in around the support with a defined risk below it to keep targeting the 0.84 handle next. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new cycle lows.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish structure on this timeframe. The trendline is near the support zone, so that area is going to be key for traders. Buyers will look for a bounce, while the sellers will look for a break.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 0.8090 level. This is where we can expect the buyers to step in with a defined risk below the zone to position for a rally into the 0.84 handle. The sellers, on the other hand, will look for a break lower to extend the pullback into the trendline. The red lines define the average daily range for today.
It’s worth noting that we have the US CPI report today so the technicals might not mean much and it would be better to trade after the release.
Upcoming Catalysts
Today we have the US CPI report. On Thursday, we get the US PPI and the US Jobless Claims figures. On Friday, we conclude the week with the US Retail Sales and the University of Michigan Consumer Sentiment report. Focus also on Fedspeak, especially after the US CPI data.
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