USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board. Last week though, the US Jobless Claims beat forecasts by a big margin, although volatility in the data is normal.
- The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
- The US Consumer Confidence yesterday beat expectations although the details about the labour market continue to weaken.
- The Fed members have been leaning on the hawkish side, but more recently the tone changed to a more neutral stance.
- The market doesn’t expect the Fed to hike anymore.
CHF
- The SNB kept interest rates steady at 1.75% vs. 2.00% expected as the central bank sees the significant tightening in recent quarters countering the remaining inflationary pressures.
- The SNB Governor Jordan said that “the central bank will not hesitate to tighten monetary policy further if necessary”, but the conditions at the moment do not call for further tightening at all.
- The Switzerland CPI ticked higher recently but the inflation rate is comfortably in the SNB’s 0-2% target band for both the headline and core measures.
- The Unemployment Rate matched the previous reading hovering at cycle lows.
- The Manufacturing PMI missed expectations and fell further into contraction, while the Services PMI remain in expansion.
- The market doesn’t expect the SNB to hike anymore.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF broke below the key swing low around the 0.89 handle and continued lower as the rate cuts expectations weighed on the US Dollar. The price is now near the key swing level at 0.8750 where we can expect the buyers to step in with a defined risk below the level to position for a rally into the downward trendline. From a risk to reward perspective, such a pullback would be a welcome development for the buyers so they can enter at even better prices.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that the price has been diverging with the MACD since the break below the key swing low at 0.89. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for an imminent pullback with the 0.89 handle being the natural target. More conservative buyers may want to wait for the price to break above the minor black trendline before joining the rally.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see more closely the current price action with the minor black trendline defining the short-term downtrend. If the price bounces on the 0.8750 level, we can expect more aggressive sellers leaning on the trendline to position for a break below the key swing level and target the cycle lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 0.89 resistance.
Upcoming Events
Tomorrow we will get the US PCE and US Jobless Claims data with the market likely focusing more on the latter given that we already saw the latest inflation data with the US CPI report just two weeks ago. On Friday, we conclude the week with the US ISM Manufacturing PMI which missed expectations by a big margin the last time.
