Fundamental Overview
The USDCHF pair eventually dropped to a new low as a series of soft US data pushed Treasury yields lower giving the CHF a boost.
The NFP report on Friday wasn’t bad, on the contrary, the data under the hood was better than the prior month. Nevertheless, the trend in the labour market continues to remain skewed to the downside.
The probabilities for the Fed to cut by 50 bps at the upcoming meeting dropped to 27% following the NFP report with a total of 110 bps of easing expected by year-end. For the SNB, the market sees a 73% probability of a 25 bps cut at the upcoming meeting with a total of 52 bps of easing by year-end.
Right now, it looks like the Fed is going to cut rates into a resilient economy, so one has to be mindful that we might eventually get an increase in economic activity that could lift long term yields and give the US Dollar a boost.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF spiked into a new low on the NFP release but eventually faded the entire move. From a risk management perspective, the sellers will have a better risk to reward setup around the 0.8555 level to position for a break below the 0.8333 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 0.8731 level next.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance around the 0.8555 level where we can find the confluence of the trendline and the 50% Fibonacci retracement level. That’s where we can expect the sellers to step in with a defined risk above the trendline to position for a break below the 0.8333 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 0.8731 level.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the recent bearish momentum. The sellers will likely lean on the trendline to position for new lows, while the buyers will want to see the price breaking higher to position for a rally into the 0.8555 resistance. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Small Business Optimism Index. On Wednesday, we get the US CPI report. On Thursday, we have the latest US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
