Fundamental Overview
The US Dollar continues to consolidate around the highs although it’s stronger against the commodity currencies. In the bigger picture, the market reached the peak in the repricing of interest rates expectations, and it will need stronger reasons to price out the remaining rate cuts for 2025.
In fact, despite lots of strong US data, the market’s pricing remaining largely unchanged around three rate cuts by the end of 2025. The focus is now on the US CPI report due tomorrow. It looks like the Fed really wants to cut next week before pausing for some months. So, we might need an upside surprise in the core inflation numbers to force them to change plans.
Even if the Fed decides to cut next week despite a hot CPI, the market will likely scale back further the rate cuts expectations for 2025 and that could trigger some risk aversion with the US Dollar rallying across the board. The best scenario would be a soft report given the overstretched long positions in the greenback. In such a case, we can expect the US Dollar to selloff across the board.
On the CHF side, the market is pricing in a 63% probability of a 50 bps cut for the SNB this week. Inflation has been much lower than the central bank’s forecasts and the strength in the Swiss Franc didn’t help either.
The new SNB’s Chairman Schlegel seems more resolute than his predecessor as he flagged negative rates if needed to dampen the appetite for the safe-haven franc, so the central bank might go for a 50 bps cut this time around.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF broke below the upward trendline that was defining the bullish momentum on this timeframe. We can expect the sellers to pile in around these levels to position for a drop into new lows. The buyers, on the other hand, will want to see the price rising back above the trendline to target new highs.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support turned resistance around the 0.88 handle with a downward trendline defining the bearish momentum on this timeframe. We can expect the sellers to step in both at the resistance and the trendline in case the resistance gets breached. The buyers, on the other hand, will pile in at every break higher.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the consolidation below the resistance. The sellers will continue to step in here to target a drop into new lows, while the buyers will look for a break higher for a rally into the trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US CPI report, which is also going to be the main event of the week. On Thursday, we have the SNB rate decision, the US Jobless Claims and the US PPI.
