Fundamental
Overview
The USD has been overall
rangebound in the last couple of weeks. The last week’s strength might have
been influenced more by quarter-end flows rather than something fundamental as
the economic data didn’t change interest rates expectations. Nonetheless, all
else being equal, the data should continue to support the risk sentiment amid a
pickup in growth without inflationary pressures and that could weigh on the US Dollar eventually.
The CHF, on the other hand,
weakened a lot as the SNB cut
rates by 25 bps bringing the policy rate to 1.25%. Now, the rate cut wasn’t
really a surprise as the market was already pricing a 68% chance going into the
event. What added to the Swiss Franc weakness was the central bank lowering its
inflation forecasts.
The only
thing bullish for the CHF was the line saying that the SNB “will be ready to
intervene in FX market if needed and as necessary”, but we already knew that
from the Chairman Jordan’s comments,
and they won’t do it unless inflation surprises to the upside or they see risks
of inflation overshooting their projections.
USDCHF
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCHF rallied strongly following the SNB decision and the price is
not near the key trendline
around the 0.9050 level. This is where we can expect the sellers to step in
with a defined risk above the trendline to position for a drop into new lows.
The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the highs.
USDCHF Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor trendline now defining the current bullish momentum.
If we get a pullback from the major trendline, we can expect the buyers to lean
on the minor trendline with a defined risk below the 0.90 handle to position
for a break above the major trendline with a better risk to reward setup.
The sellers, on the other
hand, will want to see the price breaking below the minor trendline and the 0.90
handle to turn the bias more bearish and increase the bets into new lows.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have also the 50% Fibonacci retracement level around the minor
trendline. This should technically strengthen the support zone and give the
buyers a good level where to lean on.
The sellers will need the
price to fall below the 0.90 handle to invalidate the bullish setup and
increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Job Openings and Fed Chair Powell speaking. Tomorrow, we
get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC
Meeting Minutes. On Thursday we will get the latest Swiss CPI figures and it’s
also going to be a US Holiday for Independence Day. Finally, on Friday, we
conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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