Lat Friday, the NFP missed expectations for the first time after 14 consecutive beats and caused a general USD weakness across the board. The other details in the report were good though, with the unemployment rate falling back to 3.6% and the average hourly earnings ticking higher, which is not what the Fed would want to see. In fact, the market’s expectations for a 25 bps rate hike at the July meeting remained unchanged.
Conversely, the SNB raised interest rates by 25 bps as expected at the last meeting and communicated that additional rate hikes cannot be ruled out. The Swiss CPI data though showed the inflation rate returning back within the SNB target band and should translate into a pause for the SNB at the next meeting, all else being equal.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF sold off very hard after the miss in the US NFP report. We can notice that the bias was anyway bearish as the moving averages were crossed to the downside and the sellers leant on the red 21 moving average to position for lower prices. The price has now reached the key 0.8760 level, which is the 2020 pandemic low. We can also see that the price has been diverging with the MACD for a long time now, we might see a bottom here and a strong bounce into the 0.90 handle.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the breakout lower of the range supported by the miss in the NFP led to strong bearish momentum as the sellers started to pile in aggressively. If we get a pullback here, the sellers should lean on the downward trendline to position for more downside and the break below the 0.8760 low. The buyers, on the other hand, should start stepping in here with a defined risk below the level and target the 0.90 handle. More conservative buyers may want to wait for the price to break above the trendline before piling in.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD falling right into the 0.8760 low. This is generally a sign of weakening momentum often followed by pullbacks or reversals. This should reinforce the buyers’ chances of getting a strong bounce here. The sellers will wait at the trendline and the 38.2% Fibonacci retracement level to position for more shorts.
Upcoming Events
Today the market focus will be on the US CPI report. A beat to the expected numbers, especially on the core side, should support the USD and lead to a rally in USDCHF as the markets are likely to expect a more hawkish Fed. On the other hand, a miss to forecasts across the board should lead to more USD weakness going forward as the market would see less chances of higher rates and may even bring forward rate cuts odds. We conclude the week with the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment report on Friday.
