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 CPI yesterday came in line with expectations with the disinflationary progress continuing steady.
- The labour market has been showing signs of weakening lately but last week we got some strong releases with the US Jobless Claims and the NFP coming in strongly.
- The latest ISM Manufacturing PMI missed expectations falling further into contraction, while the ISM Services PMI beat forecasts holding on in expansion.
- The University of Michigan Consumer Sentiment survey came in much better than expected with inflation expectations tumbling.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates in Q2 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”, although the conditions now 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 expects the SNB to start cutting rates in Q3 2024.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF recently pulled back into the red 21 moving average where we had also the 38.2% Fibonacci retracement level for confluence. The price got rejected from the moving average as the sellers stepped in to position for a drop into the lows around the 0.8550 level. The bias on the daily timeframe remains bearish as the price has been printing lower lows and lower highs with the moving averages being crossed to the downside, but on a shorter timeframe the US Dollar might get some strength from the FOMC rate decision.
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 target should be the start of the divergent formation around the 0.89 handle where we can also find the confluence with the 61.8% Fibonacci retracement level and the major trendline. To confirm such a rally though, the price will first need to break above the resistance zone around the 0.8775 level.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see more closely the current price action with the pair ranging around the 0.8775 resistance zone. We got a break above it recently, but the price eventually rolled over and fell below it. If the price gets into the resistance again, we can expect the sellers to step in with a defined risk above it to position for a drop into new lows increasing the bearish bets upon the break below the swing low at 0.8725. The buyers, on the other hand, will want to see the price breaking above the resistance to pile in and target a rally into the 0.89 handle.
Upcoming Events
Today, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. Tomorrow, we have the SNB rate decision where the central bank is expected to keep rates unchanged and maybe hint to rate cuts in 2024. Later in the day, we will also see the latest US Retail Sales and Jobless Claims figures, while on Friday we conclude the week with the US PMIs.
