Fundamental Overview
The USD came under pressure on Friday following the softer than expected US CPI report. The market pricing didn’t change much as it was already very dovish going into the report, but given the positive risk sentiment, the greenback remained on the backfoot.
Over the weekend, we got some very positive comments from US Treasury Secretary Bessent as US-China held trade talks in Malaysia. It looks like they’ve reached a deal, and we are now just waiting for the Trump-Xi meeting on Thursday where the two leaders are expected to confirm the positive developments.
The risk-on sentiment is expected to weigh on the dollar in the short-term, although Treasury yields could also erase the drop triggered by Trump’s escalation a couple of weeks ago. This could create some tension between bullish and bearish drivers, but for now there’s no strong reason for the dollar to rally amid the lack of key US data.
The Fed is widely expected to cut by 25 bps on Wednesday and keep the status quo given the lack of US data. For this reason, the decision is likely to be a non-event.
On the CHF side, nothing has changed. The SNB left interest rates steady and kept everything unchanged at the last meeting. SNB’s President Schlegel didn’t offer any forward guidance but he did say that the bar to cut rates further is very high and negative inflation prints in the short-term won’t be enough.
The last Swiss inflation prints rebounded a bit and the central bank does expect some increases in the next quarters, but there’s a long way to go before breaching their 2% inflation limit. So, this leaves the CHF trading mostly based on risk sentiment.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF bounced around the key 0.7872 level and it’s now trading in the middle of the two key levels at 0.8073 and 0.7872. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price rejected the downward trendline and bounced around the 0.7940 support. We got another rally into the trendline, but it looks like it failed again. From a risk management perspective, the buyers will likely continue to step in around the support to keep targeting a break above the trendline and the 0.7980 resistance.
The sellers, on the other hand, will look for a break below the support to start targeting the 0.7872 level. In case the price rallies into the resistance though, we can expect the sellers to pile in there with a defined risk above the resistance to position for a drop into new lows.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as market participants will likely continue to play the range until we get a breakout on either side. The red lines define the average daily range for today.
Upcoming Catalysts
On Wednesday we have the FOMC policy decision, while on Thursday, we have the Trump-Xi meeting.
