Fundamental
Overview
The weak US NFP report last Friday triggered risk-off flows.
Things got dire on Monday as the Japanese Nikkei dropped 12% overnight and we
saw a general selloff in global stock markets.
At one point, the markets
saw the Fed cutting rates by 136 bps by year-end and some chances of an
emergency rate cut. Although the volatility calmed down a bit and markets
recovered the Monday’s losses, the expectations haven’t changed much as the
market is still pricing a higher probability for a 50 bps cut by the Fed in
September and a total of 103 bps by year-end.
The CHF gained against the
USD both because of the aggressive rate cuts pricing for the Fed and the
risk-off flows.
USDCHF
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCHF dropped all the way down to the 0.8555 support and even spiked below it on Monday due to the
global stock market rout. The pair recovered all the losses since Monday and it’s
now trading around the 0.8555 level.
The buyers will likely pile
in around these levels with a defined risk below the 0.8555 support to position
for a pullback into the 0.8730 resistance. The sellers, on the other hand, will
want to see the price breaking lower to increase the bearish bets into the
0.8333 level next.
USDCHF Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor upward trendline defining the current bullish
momentum. This might even turn into a bearish
flag but we will need a break below the trendline and the 0.85 handle to
confirm it. The buyers will likely lean on the trendline to position for new
highs, while the sellers will look for a breakout to the downside.
USDCHF Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the price has been printing higher highs and higher lows on this
timeframe as the mood in the markets slowly improved in the last two days. The
red lines define the average daily range for today.
Upcoming
Catalysts
This week is basically empty on the data front. The only notable economic release
will be on Thursday when we get the latest US Jobless Claims figures. The
market will also pay close attention to Fed members’ comments given the latest
developments in the markets.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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