Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked higher, but Continuing Claims remained solid. We have already seen Claims spiking higher in the past months, so it shouldn’t be worrying yet. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the soft-landing narrative was supported. Yesterday, we got a strong US Retail Sales report and the PBoC cut rates as China is starting to stimulate more given its ailing economy. The market may be worried now about inflation remaining higher for longer and the Fed forced to do more.
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 is slowly rising to the pullback target near the 0.8858 resistance where we can also find the 50% Fibonacci retracement level and the trendline. This is where we should see strong sellers stepping in with a defined risk above the trendline to target another selloff towards the lows. The bias for now remains bullish as the moving averages have crossed to the upside and the price has been printing higher highs and higher lows.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that we are starting to see a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we should see only pullbacks unless the US data becomes ugly. The likely support for the buyers should be the upward trendline around the 0.8750 level. That’s where we can expect to see a bounce to target the 0.8858 resistance. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the chances of a reversal and pile in to target the lows.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that we have a resistance zone around the 0.8795 level as the price failed to extend the rally above it multiple times. A break above this zone should see more buyers piling in and take the price into the 0.8858 resistance. The sellers can only wait for the break of the upward trendline as the bias remains bullish.
Upcoming Events
This week is a bit empty on the data front and the most important release will be the US Jobless Claims tomorrow. Readings in line with expectations shouldn’t be market moving but big deviations should offer strong reactions. In fact, in case we see a big beat, we can expect the USD to appreciate across the board, but with a big miss, the greenback is likely to weaken as the market will price out the hawkish expectations.
