Fundamental Overview
The USD last week lost ground across the board following the soft US CPI report as the market priced back in two rate cuts by the end of the year. The moves were reversed soon after though as we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for this year despite the soft US CPI report. Fed Chair Powell backpedalled on the projections nonetheless making them a bit less worrying as the central bank remains very data dependent.
The CHF, on the other hand, got a boost a couple of weeks ago from SNB’s Jordan comments where he said that if upward risks to Swiss inflation were to materialise, these would most likely be associated with a weaker franc, which could be counteracted by selling foreign exchange reserves (buying CHF). On top of that, the Swiss Franc found support from the risk-off sentiment we’ve seen last week.
On Thursday, the SNB is expected to cut interest rates to 1.25% although the market pricing stands around 60%, so it’s more of a coin-flip between 1.50% and 1.25%. The latest inflation rate came in line with SNB’s estimate at 1.4% Y/Y (Core 1.2% Y/Y).
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF got rejected from the 0.90 resistance and dropped back into the key support around the 0.8885 level where we have also the 38.2% Fibonacci retracement level of the entire rally from the cycle low at 0.8333.
This is where we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 0.90 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.8733 level next.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we might have a range now between the 0.8885 support and 0.9000 resistance. For now, the sellers remain in control as the bearish momentum remains intact but look out for a turnaround if we get a strong bounce and we start to see higher highs and higher lows.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward trendline defining the current bearish momentum. If we get a pullback from the support zone, the sellers will likely lean on the trendline again to position for a downside breakout with a better risk to reward setup.
The buyers, on the other hand, will want to see the price breaking higher to gain more conviction for a rally and increase the bullish bets into the 0.90 resistance. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Retail Sales and US Industrial Production. On Thursday, we have the SNB Policy Decision and later in the day we get the US Housing Starts, Building Permits and the latest US Jobless Claims figures. On Friday, we conclude the week with the US PMIs.
