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 US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
- The labour market continues to show weakness as Continuing Claims are now rising at a fast pace with the last NFP report missing across the board and yesterday’s Job Openings falling much more than expected.
- The ISM Manufacturing PMI last week missed expectations falling further into contraction, while the ISM Services PMI yesterday beat forecasts holding on in expansion.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates as soon as Q1 2024.
CHF
- The SNB kept interest rates steady at 1.75% at the last meeting 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 recent Switzerland CPI missed expectations by a big margin with the inflation rate remaining in the SNB’s target band.
- The Unemployment Rate remains steady at cycle lows.
- The Manufacturing PMI recently slightly beat expectations reaming in contraction, while the Services PMI hold on 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 since the break below the swing low around the 0.89 handle, USDCHF just kept on falling strongly as the market continued to price in aggressively multiple rate cuts for the Fed in 2024. This pricing might have gone too far too fast and if the economic data doesn’t fall off a cliff in the next few weeks, we might see a pullback in the pair. From a risk to reward point of view, the best spot for the sellers would be the resistance zone around the 0.89 handle where we can find the confluence with the trendline and the 50% Fibonacci retracement level.
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 swing low at 0.89. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the recent break above the minor downward trendline might be an early signal of a reversal, but the buyers will need to break above the most recent lower high at 0.8770 to confirm it. The sellers, on the other hand, are likely to step in around these levels with a defined risk above the 0.8770 level to position for a drop into new lows.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see more closely the current price action with the pair tentatively approaching the 0.8770 level again. What happens around this level should determine where we go next as a break to the upside is likely to trigger a rally into the 0.89 resistance while a strong rejection and a break below the 0.87 handle should lead to a drop into new lows.
Upcoming Events
Today we have another US labour market report with the release of the US ADP data. Tomorrow, it will be the time for the Switzerland Unemployment rate and the US Jobless Claims figures, while on Friday we conclude the week with the NFP report.
