US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- Last week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
Switzerland:
- The SNB raised interest rates by 25 bps as expected at the last meeting and communicated that additional rate hikes cannot be ruled out as it maintains the hawkish stance.
- The Switzerland CPI showed the inflation rate remaining within the SNB 0-2% target band.
- The Unemployment Rate matched the previous reading remaining near the cycle lows.
- The Manufacturing PMI remained in strong contraction.
- The market expects the SNB to pause at the next meeting.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF recently broke out of the key downward trendline that was defining the major downtrend. The pair remains in a clear uptrend with the price printing higher highs and higher lows and the moving averages being crossed to the upside. The pair got stuck into a consolidation phase after the breakout as the market awaits new data before the next major move. The breakout of the trendline though opened the door for a rally into the 0.9122 resistance.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that USDCHF is basically trading withing a major rising channel and the price started to consolidate around the upper bound of the channel. From a risk management perspective, the buyers would be better off waiting for a pullback into the 0.8858 support where we have the confluence with the 38.2% Fibonacci retracement level and the daily red 21 moving average. That’s where we can expect the buyers to pile in with a defined risk below the support and target the 0.9122 resistance. The sellers, on the other hand, are likely to pile in here around the upper bound of the channel to target the support level first and the lower bound of the channel in case the price breaks through.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that we have this mini range between the 0.89 support and 0.8940 resistance. The best strategy here is generally to stay out and wait for a clear breakout. A break to the upside should see more buyers piling in to extend the rally into the 0.9122 resistance, while a break to the downside should see more sellers coming into the market to extend the fall into the support zone.
Upcoming Events
This week we have many important events. Today is the US CPI Day, which is expected to show an increase in headline inflation due to higher energy prices but further disinflation in the core measure. Tomorrow, we will see the latest US Jobless Claims, PPI and Retail Sales data. Finally on Friday, we get the University of Michigan Consumer Sentiment report. Strong data is likely to boost the USD, while weak readings should weaken it in the short term.