Fundamental
Overview
The USD last week lost
ground across the board following the soft US CPI report as the market priced back in two rate
cuts by the end of the year. The moves were reversed soon after though as we
got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for
this year despite the soft US CPI report. Fed Chair Powell backpedalled on the projections nonetheless making
them a bit less worrying as the central bank remains very data dependent.
The CHF, on the other hand,
got a boost a couple of weeks ago from SNB’s Jordan comments where he said that if upward risks
to Swiss inflation were to materialise, these would most likely be associated
with a weaker franc, which could be counteracted by selling foreign exchange
reserves (buying CHF). On top of that, the Swiss Franc found support from the
risk-off sentiment we’ve seen last week.
On Thursday, the SNB is
expected to cut interest rates to 1.25% although the market pricing stands
around 60%, so it’s more of a coin-flip between 1.50% and 1.25%. The latest inflation rate
came in line with SNB’s estimate at 1.4% Y/Y (Core 1.2% Y/Y).
USDCHF
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCHF got rejected from the 0.90 resistance
and dropped back into the key support around the 0.8885 level where we have
also the 38.2% Fibonacci retracement level of the entire rally from the
cycle low at 0.8333.
This is where we can expect
the buyers to step in with a defined risk below the support to position for a
rally back into the 0.90 resistance. The sellers, on the other hand, will want
to see the price breaking lower to increase the bearish bets into the 0.8733
level next.
USDCHF Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we might have a range now between the 0.8885 support and 0.9000
resistance. For now, the sellers remain in control as the bearish momentum
remains intact but look out for a turnaround if we get a strong bounce and we start
to see higher highs and higher lows.
USDCHF Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a downward trendline
defining the current bearish momentum. If we get a pullback from the support
zone, the sellers will likely lean on the trendline again to position for a downside
breakout with a better risk to reward setup.
The buyers, on the other
hand, will want to see the price breaking higher to gain more conviction for a
rally and increase the bullish bets into the 0.90 resistance. The red lines define
the average
daily range for today.
Upcoming
Catalysts
Today we have the US Retail Sales and US Industrial Production. On Thursday,
we have the SNB Policy Decision and later in the day we get the US Housing
Starts, Building Permits and the latest US Jobless Claims figures. On Friday,
we conclude the week with the US PMIs.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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