The recent NFP report presented a mixed picture. While the headline number exceeded expectations, there was also a notable increase in unemployment and a decline in average weekly hours. These less favourable details led to a weakening of the USD as the market began to reassess its hawkish expectations and adopt a more cautious stance. The ISM Services PMI added to the subdued sentiment, falling short of expectations, particularly in the prices paid sub-index, which sparked hopes of a potential decline in core inflation .
Shifting focus to jobless claims, there was a significant deviation from the expected number. However, seasonal adjustments were cited as the likely culprit. On a positive note, continuing claims demonstrated further improvement, suggesting that individuals are finding new employment relatively quickly after experiencing a period of unemployment.
Overall, the previously hawkish sentiment observed in May has started to fade, as evident from the recent change in the outlook of Federal Reserve members. They have expressed a preference for a cautious approach and avoiding significant actions during the upcoming FOMC meeting. The latest set of data supports their concerns and justifies their restrained approach but as we have seen yesterday with the US CPI report, core inflation remains stubbornly high, and the month-over-month rate is stuck at 0.4%.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that the rally in USDCHF has stalled at a key resistance level at the 0.91 handle. The moving averages are still crossed to the upside indicating a bullish bias, but they are on the verge of a crossover as the price keeps ranging. This may turn into a bullish flag consolidation if the price confirms it breaking above the 0.91 resistance. The target for the buyers will be the 0.94 handle. This will depend on the next set of economic data. If they are strong, the USD is likely to rally, but if they are weak the USD should weaken even more.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has recently broke out of the upward trendline that acted as a strong support in the past month. The strong move after the break was also helped by hawkish comments from the SNB’s Governor Jordan. Technically, the price has made a new lower low in that case, so the structure on this timeframe turned bearish, but we will need a confirmation from the data to start seeing more follow through and the USDCHF pair falling into the 0.8858 support.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have two levels to watch: the 0.9073 high and the 0.9032 low. We are likely to range here trading into the FOMC rate decision and we might even see some spikes that could lead to fakeouts once the Fed event gets underway, but a break on either side should show what is the prevailing sentiment. A break to the upside should take the USDCHF pair to the 0.91 resistance, while a break to the downside should result in a move towards the 0.8980 low.
Today we have the FOMC rate decision to watch and in the next days the highlights are the US Jobless Claims report on Thursday and the University of Michigan consumer sentiment survey on Friday. Beware that the last time the consumer sentiment survey impacted the market heavily as long term inflation expectations showed a big jump to the upside, so another increase may give the USD a boost while a big miss should weaken it.