US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with a strong beat in Jobless Claims and yesterday with the beat in Job Openings.
- The ISM Manufacturing PMI beat expectations in another sign that the US economy remains resilient.
- The market doesn’t expect the Fed to hike again at the moment, but rate cuts continue to be priced out in 2024.
Switzerland:
- The SNB kept interest rates steady at 1.75% vs. 2.00% as the central bank sees the significant tightening in recent quarters countering the remaining inflationary pressures.
- The Switzerland CPI showed again that the inflation rate is comfortably in the SNB’s 0-2% target band for both the headline and core measures.
- The Unemployment Rate matched the previous reading hovering at cycle lows.
- The Manufacturing PMI saw a notable bounce back although it remains in contraction, while the Services PMI remain in expansion.
- The market expects the SNB to keep rates steady at the next meeting.
USDCHF Technical Analysis – Daily Timeframe
On the daily chart, we can see that the USDCHF pair has been rallying non-stop since the beginning of September as the SNB was expected to end its tightening cycle while the resilient US data could still lead to another rate hike by the end of the year. The recent break above the 0.9144 swing level opened the door for a rally into the 0.9442 level.
USDCHF Technical Analysis – 4-hour Timeframe
On the 4-hour chart, we can see that the last leg higher is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if we do get a pullback, there’s a strong support zone around the 0.91 handle where we can find the confluence of the trendline and the 50% Fibonacci retracement level. That’s where the buyers are likely to step in again with a defined risk below the support to target the 0.9442 level. The sellers, on the other hand, will want to see the price breaking through the trendline to pile in even more and target the next major trendline around the 0.90 handle.
USDCHF Technical Analysis – 1-hour Timeframe
On the 1-hour chart, we can see that we have a minor support zone around the 0.92 handle where there’s also the 38.2% Fibonacci retracement level for confluence. This is where we can expect to see more aggressive buyers to pile in with a defined risk below the support to position for a rally into the 0.9442 level. If the price breaks below the support though, we will have a new lower low and the market structure on this timeframe would turn bearish. In that case, the sellers are likely to pile in and position for a drop into the 0.91 handle.
Upcoming Events
Today on the agenda we have the ADP report and the ISM Services PMI. Tomorrow, we will see the latest Jobless Claims data, which continues to show a solid labour market. Finally on Friday, it will be the time for the NFP report which is the only one the Fed will see before its next rate decision.
