Fundamental Overview
The USD weakened across the board since last Friday following the soft US NFP report. The data showed some more labour market cooling with an increase in the unemployment rate and a decrease in wage growth. We basically have an economy that is slowing but still growing. We will see if the market will be able to keep the positive sentiment on soft landing hopes or start to worry about a recession.
The CHF, on the other hand, weakened a lot as the SNB cut rates by 25 bps at the last meeting bringing the policy rate to 1.25% and revising its inflation forecasts lower. The only thing bullish for the Swiss Franc was the line saying that the SNB “will be ready to intervene in FX market if needed and as necessary”, but we already knew that from the Chairman Jordan’s comments, and they won’t do it unless inflation surprises to the upside or they see risks of inflation overshooting their projections.
The recent Swiss CPI report missed expectations once again, so there’s no need for the central bank to worry about inflation. The probabilities for another rate cut in September are currently at 50%.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF got rejected from the trendline and eventually fell below the 0.90 handle as the US data came in on the softer side. This switched the near-term bias to the downside.
The buyers will want to see the price breaking above the trendline to regain control and increase the bullish bets into the 0.9150 level next. The sellers, on the other hand, will likely step in around the 0.90 handle and the trendline to keep pushing towards the 0.8885 support.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance around the 0.90 handle where we can find the confluence of the recent swing low and the 50% Fibonacci retracement level.
This is where we can expect the sellers to pile in with a defined risk above the level to position for a drop into the 0.8885 level next. The buyers, on the other hand, will want to see the price breaking higher to regain some control and target a breakout of the trendline.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on the trendline to push into new highs, while the sellers will want to see a breakout to the downside to start piling in. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have Fed Chair Powell testifying to Congress and the markets will be focused on any view or hint about monetary policy after the recent NFP report. Thursday will be the most important day of the week as we get the US CPI and the US Jobless Claims figures. Finally, on Friday, we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.