US:
- The Fed left interest rates unchanged as expected.
- 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 as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
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 the inflation rate remaining within the SNB 0-2% target band.
- The Unemployment Rate matched the previous reading hovering at cycle lows.
- The Manufacturing PMI remained in strong contraction.
- 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 took off as the SNB went on the sidelines and the FOMC surprised with a more hawkish than expected dot plot. This price action is not the best as parabolic movements generally end in a big correction, which is something that the buyers would love to see at the moment. The break of the swing high at the 0.9144 level has opened the door for a rally into the next swing level at 0.9442. The trend remains clearly bullish though and the buyers are likely to pile in at every pullback.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that we have a minor upward trendline which would be a really good support for the buyers in case we get a big correction, although it’s hard to envision it at the moment. It seems like only a meaningful fundamental catalyst can provide such a big pullback which might be a weak US Jobless Claims report or much higher than expected Swiss inflation data.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. The recent price action has also formed what looks like a rising wedge, which is a reversal pattern. If the price breaks below the bottom trendline, the sellers are likely to pile in and target the base of the pattern around the 0.9030 level. The buyers, on the other hand, are likely to step in on the bottom trendline where there’s also confluence with the support and the red 21 moving average.
Upcoming Events
Tomorrow we will see the latest US Jobless Claims data, which continues to be very important for the Fed and the market. Strong data should keep on supporting the USD, while weak readings are likely to weigh on the greenback in the short term. On Friday, we conclude the week with the latest US PCE report.
