Fundamental Overview
The USD continues to remain supported since the last
FOMC decision as the market perceived it as more hawkish than expected. After the rally during the low volume Christmas holidays, we are now seeing a pullback pretty much across the board.
The market’s pricing didn’t change much with roughly two rate cuts priced in for this year, which is in line with the Fed’s projections. The central bank has switched its focus back to inflation, so the next US CPI report should have a bigger influence on interest rates expectations than the US NFP this Friday (barring big deviations).
On the CHF side, the
SNB cut interest rates by 50 bps at the last policy meeting bringing the policy rate to 0.50% and dropping the language signalling further cuts in the coming quarters. This suggests that the central bank will likely slow the pace of easing which is something that the market was already expecting with two 25 bps cuts priced in for this year.
The
Swiss CPI released today didn’t change much for the central bank as the data came basically in line with expectations.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCHF extended the rally above the 0.91 handle during the Christmas holidays before giving back most of the gains. From a risk management perspective, the buyers will have a better risk to reward setup around the
trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.87 handle next.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below the trendline that was defining the bullish momentum on this timeframe. This is generally a signal of a loss of momentum with high chances of bigger pullbacks.
The sellers will need to break below the
support zone around the 0.9020 level to increase the bearish bets into the major trendline. The buyers, on the other hand, will likely step in around these levels to position for a rally into new highs.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor counter-trendline defining the current pullback. The buyers will want to see the price breaking above the counter-trendline to increase the bullish bets into new highs, while the sellers will likely lean on it to position for the break below the support zone. The red lines define the
average daily range for today.
Upcoming Catalysts
Today, we get the US ISM Services PMI and the US Job Openings data. Tomorrow, we have the US ADP and the FOMC Meeting Minutes. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
