Fundamental Overview
The weak US NFP report last Friday triggered risk-off flows. Things got dire on Monday as the Japanese Nikkei dropped 12% overnight and we saw a general selloff in global stock markets.
At one point, the markets saw the Fed cutting rates by 136 bps by year-end and some chances of an emergency rate cut. Although the volatility calmed down a bit and markets recovered the Monday’s losses, the expectations haven’t changed much as the market is still pricing a higher probability for a 50 bps cut by the Fed in September and a total of 103 bps by year-end.
The CHF gained against the USD both because of the aggressive rate cuts pricing for the Fed and the risk-off flows.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF dropped all the way down to the 0.8555 support and even spiked below it on Monday due to the global stock market rout. The pair recovered all the losses since Monday and it’s now trading around the 0.8555 level.
The buyers will likely pile in around these levels with a defined risk below the 0.8555 support to position for a pullback into the 0.8730 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.8333 level next.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. This might even turn into a bearish flag but we will need a break below the trendline and the 0.85 handle to confirm it. The buyers will likely lean on the trendline to position for new highs, while the sellers will look for a breakout to the downside.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been printing higher highs and higher lows on this timeframe as the mood in the markets slowly improved in the last two days. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The only notable economic release will be on Thursday when we get the latest US Jobless Claims figures. The market will also pay close attention to Fed members’ comments given the latest developments in the markets.
