Fundamental Overview
Last Friday, Fed Chair Powell delivered a more dovish than expected speech at the Jackson Hole Symposium as he basically kept the door open for a 50 bps cut at the September meeting. In fact, the line saying that they will do everything they can to support a strong labour market was key.
That pushed Treasury yields lower and weighed on the US Dollar across the board giving the Swiss Franc a boost as the carry trades continue to lose some appeal. Nonetheless, the Fed is cutting 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.
That might not be the market’s focus at the moment because we will need a catalyst to change the narrative. The focus right now is on the US labour market data as more weakening could not only trigger a more aggressive Fed easing but also bring back recessionary fears which should support the CHF.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF broke below the key 0.8550 level following the dovish Powell’s speech and extended the drop into the 0.8450 level. The sellers remain in control for now and they will keep targeting the 0.8333 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally into new highs.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a better risk to reward around the 0.8555 level where they will also find the 38.2% Fibonacci retracement level for confluence. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the major trendline around the 0.8650 level.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is currently confidence in a tight range between the 0.8455 support and the 0.8485 resistance. The buyers will want to see the price breaking higher to position for a rally into the 0.8555 level, while the sellers will look for a break lower to increase the bearish bets into the 0.8333 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude with the US PCE report.
