US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market remains fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The Fed members continue to cite elevated long term yields as a reason to proceed carefully.
- The market doesn’t expect the Fed to hike anymore.
Switzerland:
- The SNB kept interest rates steady at 1.75% vs. 2.00% as the central bank sees the significant tightening in recent quarters countering the remaining inflationary pressures.
- The Switzerland CPI showed again that the inflation rate is comfortably in the SNB’s 0-2% target band for both the headline and core measures.
- The Unemployment Rate matched the previous reading hovering at cycle lows.
- The Manufacturing PMI saw a notable bounce back although it remains in contraction, while the Services PMI remain in expansion.
- The market expects the SNB to keep rates steady at the next meeting.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCHF pair finally pulled back after the parabolic rise into the 0.92 handle. We have a good support zone around the 0.90 handle where we can find the confluence with the previous swing level, the 50% Fibonacci retracement level and the trendline. This is where the buyers are likely to step in with a defined risk below the trendline to position for another rally into the 0.9442 resistance. The sellers, on the other hand, will want to see the price breaking lower to pile in even more and extend the drop into the lows.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that in case we get a pullback before getting into the 0.90 support, the sellers are likely to lean on the downward trendline where we have the confluence of the red 21 moving average, the 50% Fibonacci retracement level and the broken upward trendline. The buyers, on the other hand, will want to see the price breaking higher to pile in and position for the rally into the 0.9442 resistance.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that the price is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might signal a pullback into the trendline before another drop into the 0.90 support or the price might extend the divergence towards the support zone and give the buyers even more conviction to position for a rally.
Upcoming Events
This week the market is likely to focus on the US CPI report as that’s what might change the expectations around the next FOMC rate decision. Today, we will see the US PPI data and later in the day the FOMC Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures. On Friday we conclude the week with the University of Michigan Consumer Sentiment report.
