The miss in the US CPI last week triggered a selloff in the US Dollar across the board. The market is increasingly confident that the July hike will be the last one for this cycle and what will follow are rate cuts sometime in early 2024. Moreover, there’s also a positive risk sentiment in the market due to the soft-landing narrative caused by the falling inflation rate, resilient labour market and rising consumer sentiment. All of the above weighed a lot on the USD.
Conversely, 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 Swiss CPI data though showed the inflation rate returning back within the SNB target band and should translate into a pause for the SNB at the next meeting, all else being equal.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that the incredibly strong selloff following first the miss in the US NFP report and then the miss in the US CPI report extended for days with almost no pullbacks. The price is now a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see some consolidation or a pullback into the moving average before the next major move.
USDCHF Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum is finally waning as the price is starting to consolidate around the 0.86 handle. We can also see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, a good spot for the sellers would be the 0.8760 resistance where we can also find the 38.2% Fibonacci retracement level of the entire leg lower. At the moment, aggressive sellers are already leaning on the red 21 moving average, but if the price rises above the moving average, we should see the buyers piling in to target a pullback into the 0.8760 level.
USDCHF Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has recently broke out of the downward trendline as the momentum started to ebb. We can also notice that we have a minor resistance level at 0.8630, which will be the key level that the buyers will need to break to extend the rally into the 0.8760 resistance. More aggressive sellers, on the other hand, might lean on that level to target a new lower low.
Upcoming Events
The economic data to watch next is the US Jobless Claims report on Thursday. Good data should give the US Dollar a boost in the short term, but bad data would call for a more dovish market reaction and weigh on the greenback again.
