US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US CPI last week came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid.
- The other important economic data like the ISM Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
- The Fed members are leaning towards a pause in September and the next decision will still be dictated by the economic data.
- The market doesn’t expect the Fed to hike today, but there’s now basically a 50/50 chance of a hike in November.
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 remaining within the SNB 0-2% target band.
- The Unemployment Rate matched the previous reading remaining low.
- The Manufacturing PMI remained in strong contraction.
- The market expects the SNB to pause at the upcoming meeting.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF has been in a strong uptrend since August as the US data remined strong while the Switzerland data kept on surprising to the downside. The Switzerland inflation rate is also within the SNB’s target band, so the market has likely positioned already for a pause at the upcoming meeting. Looking ahead, the pair seems to be targeting the 0.9122 resistance and if we get a bigger pullback, the buyers are likely to lean on the upward trendline where we can also find the confluence with the red 21 moving average.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that the pair recently broke out of a minor resistance, retested it, and climbed up further. The bullish momentum though is clearly weaker, and we can also see that from the divergence with the MACD which is usually a sign of waning momentum often followed by pullbacks or reversals. In this case, if the price breaks below the recent resistance turned support around the 0.8945 level, we can expect a fall into the upward trendline where the buyers will step in to target a new high. The sellers, on the other hand, will pile in both on a break below the 0.8945 support and on an eventual break below the upward trendline.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see more closely the support zone around the 0.8945 level. From a risk management perspective, the buyers would be better off to wait for a pullback into the support and pile in with a defined risk below it to target a new high. The sellers, on the other hand, should wait for a break below the support before getting the confirmation of a bigger correction.
Upcoming Events
This week has just a couple of important economic releases with the FOMC and SNB rate decisions being the highlights. Today, the Fed is expected to keep rates unchanged, and the markets will focus more on the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to repeat that they remain data dependent. Tomorrow, the SNB is expected to keep rates unchanged although there’s also a good chance that they raise by 25 bps again, while later in the day we will see the latest US Jobless Claims report. On Friday we conclude the week with the US PMIs data.