Fundamental Overview
The USD rallied across the board yesterday following an aggressive selloff in the GBPUSD pair as the UK 30yr yield jumped into a new cycle high. Some of the gains were eventually erased but the greenback remained supported as the price action continues to be choppy as we head into the key US data.
In fact, traders will be focused on the US ADP and NFP reports. The data will influence interest rates expectations greatly. Right now, the market is pricing a 91% probability of a rate cut in September and a total of 55 bps of easing by year-end.
Strong data might take the probability for a September cut towards a 50/50 chance but will certainly see a more hawkish repricing further down the curve and likely support the dollar. Soft data, on the other hand, will likely see traders increasing the dovish bets with a third cut by year-end being priced in and weighing on the greenback.
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 last Swiss CPI showed a slight improvement in inflation but even if we get more such reports it won’t change anything for the SNB given that there’s a long way to go before breaching their 2% limit.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF is compressing between two trendlines. The sellers stepped in around the top trendline to target a drop into the bottom trendline. If we get there, we can expect the buyers to lean on the trendline with a defined risk below it to position for a rally back into the top trendline targeting a break above it.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the price action between the two trendlines. In the bigger picture, this could turn into a bullish flag if we get an upside breakout. But if the price breaks out to the downside, it should technically invalidate the pattern and increase the bearish momentum.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe where the price bounced off of. The buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break lower to increase the bearish bets into the major bottom trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Job Openings data. Tomorrow, we get the Swiss CPI, the US ADP, the latest US Jobless Claims figures and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.
