Last week, the NFP missed expectations for a second time in a row and the previous numbers were all revised lower. This was seen as a disappointment as the labour market seems to be a touch weaker than previously expected. Nevertheless, the unemployment rate fell once again and lessened the disappointment from the miss in the payrolls number. The worse part for the Fed is that the average hourly earnings beat expectations, and such high wage growth is not consistent with a sustainable return to the 2% target. It’s worth reminding though, that the Fed will see another NFP report before the September meeting, so this NFP doesn’t change much, but the data leading into the meeting can still weigh on sentiment.
On the other hand, 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 recently showed the inflation rate easing even more within the SNB 0-2% target band and the Unemployment Rate ticking higher a little. Overall, it looks like the SNB can pause at the next meeting, barring any upside surprise before that date.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF continues its pullback towards the downward trendline and the 50% Fibonacci retracement level around the 0.8858 resistance. The short-term trend is clearly bullish as the price has been printing higher highs and higher lows and the moving averages have crossed to the upside. At the moment, the price is struggling to break above the 0.8761 resistance, as we can see by the multiple rejections from the level, and we can expect some consolidation here until the US CPI tomorrow.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that the price has recently pulled back from the 0.8761 resistance into the previous swing high support around the 0.87 handle where we had also the 38.2% Fibonacci retracement level. The buyers stepped in there to target the 0.8858 resistance but got rejected once again at the 0.8761 level. This is starting to look like an ascending triangle pattern, so a breakout on either side could lead to a quick move.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see more closely the current rangebound price action between the 0.8700 support and the 0.8780 resistance. The best strategy would be to wait for the US CPI tomorrow and enter in the direction of the breakout. More aggressive buyers and sellers may want to “play the range” by buying at support and selling at resistance aiming for a better risk to reward setup.
Upcoming Events
This week the main event will be the US CPI report on Thursday. The market is likely to focus more on the Core readings as this is what the Fed is more interested in. Higher than expected data should give the US Dollar a boost as the market’s expectations will be skewed more on the hawkish side. On the other hand, lower than expected readings should weigh on the USD as it would support the soft-landing narrative in the short-term. At the same time of the US CPI data, we will also see the latest US Jobless Claims report, which is less likely to move the market since it’s released at the same time of the CPI, but big surprises should have an effect, nonetheless. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday where the market is likely to focus more on the inflation expectations figures.