US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board last week, while the US Jobless Claims remained solid.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- Yesterday, the US Job Openings and Consumer Confidence reports missed expectations by a big margin.
- The market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
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 easing even more within the SNB 0-2% target band.
- The Unemployment Rate ticked higher a little.
- 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 eventually reached the key resistance zone around the 0.8858 level where we had the confluence with the downward trendline and the 50% Fibonacci retracement level. The sellers stepped in there with a defined risk above the level to target new lows. At the moment, the short-term trend is still bullish as the price has not made a new lower low yet and the moving averages are crossed to the upside, but after yesterday’s weak US data, we may expect more sellers coming into the market soon.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that we had a divergence with the MACD right when the price was approaching the key resistance zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if the price bounces around the 0.8761 level we might have just a pullback, but if it breaks lower making a new lower low, then we can expect new lows coming soon after.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that we have a nice bearish setup if the price pulls back into the previous support now turned resistance around the 0.8815 level where we have also the confluence with the 50% Fibonacci retracement level. In fact, we can expect the sellers to pile in there with a defined risk above the level and target a break of the 0.8761 support to reach new lows. The buyers, on the other hand, will want to see the price breaking higher to position for a breakout of the 0.8858 resistance zone.
Upcoming Events
This week is an important one given that we will see many key labour market data for the US, including the NFP, before the next FOMC meeting. Today, we have the US ADP report and after yesterday’s misses, a weak report is likely to increase recessionary fears. Moving on to tomorrow, we will see the US Jobless Claims and the US PCE data. Finally, we conclude the week with the Switzerland CPI, the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need a very strong NFP to raise the chances of another hike at the upcoming meeting.