The NFP report last Friday beat expectations once again on the headline number raising the record streak to 14. The details of the report weren’t that great though. The unemployment rate jumped from 3.4% to 3.7%, which makes it the biggest M/M increase since the pandemic. The average workweek hours worked ticked lower (employers generally lower the hours before laying off people).
All in all, there was something for everyone there. The optimists saw a solid jobs growth and the higher unemployment rate and soft average hourly earnings as less labour market tightness that should reduce inflationary pressures. The lower average weekly hours worked may be seen as just a return to pre-pandemic trend.
The pessimists, on the other hand, focused more on the details rather than the headline number as generally it’s not the absolute number that matters but the trend.
Yesterday, the US ISM Services PMI came out much lower than expected at 50.3 barely missing the contraction territory. The employment sub-index fell into contraction and prices paid sub-index decreased substantially returning to the May 2020 level. As a consequence, the market further priced out additional rate hikes from the Fed.
This week, the Switzerland Headline CPI came at 2.2% Y/Y and the Core measure at 1.9% Y/Y. The SNB inflation target is just below 2%, so the central bank may pause at its June meeting and, even if it hikes, it should be the last one for this cycle.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, the USDCHF rally has stalled at a key resistance area near the 0.91 handle. Looking left, we can see that this zone has been a strong support in the beginning of the year, eventually giving way as the market started to price in rate cuts for the Fed due to the regional banking crisis in March. The current trend is bullish as we can also notice from the moving averages being crossed to the upside. The buyers have leant on the moving averages at every dip, but we are now coming at a crossroads and the fundamentals will decide where we’ll go next.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, the price is trading around the upward trendline that’s been a strong support for the buyers and offered many good entry points in the past weeks. Now the trendline is clearly becoming weaker as the USDCHF consolidates beneath the 0.91 handle. We are likely to see this rangebound price action until the next week when the US CPI and FOMC events take place.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we have some key levels to watch ahead of the next week’s key economic events. On the downside, the swing support level at 0.9035 will be the last line of defence for the buyers as the sellers will pile in aggressively in case USDCHF falls through it. On the upside, the 0.91 resistance will be key as a breakout will give the buyers more conviction to target new higher highs. The sellers, on the other hand, will try to defend that level and have an even better risk to reward setup for a downside extension.
