Fundamental
Overview
The USD came under some
pressure on Friday as the risk-off sentiment caused by Trump’s threat of
substantially increasing tariffs on China weighed on Treasury yields. Over the
weekend, we had more soothing comments from Trump and other US officials which
triggered a recovery in risk sentiment.
The positive mood weighed a
bit on the greenback but eventually the risk mood deteriorated again as US
Treasury Secretary Bessent poured some cold water on the weekend hype and the
Chinese imposed special port fees on US related vessels as countermeasures
against the US previous port fees.
Domestically, nothing has
changed for the US dollar as the US government shutdown continues to delay many
key US economic reports. The dollar “repricing trade” needs strong US data to
keep going, especially on the labour market side, so any hiccup on that front
is likely to keep weighing on the greenback.
The market pricing shifted
more dovish after the latest US-China escalation with 48 bps of easing by
year-end and 122 bps cumulatively by the end of 2026. The BLS announced last
week that despite the shutdown, it will release the US CPI report on October
24, so that’s going to be a key risk event.
In case we get hot data, we
will likely see a hawkish repricing in interest rates expectations with the
December cut being priced out. Conversely, a soft report shouldn’t change much
in terms of pricing, but it will likely weigh on the greenback anyway. This
will of course be taken in context of the US-China relations by then.
On the CHF side, nothing
has changed. The SNB left interest rates steady and kept everything unchanged
at the last meeting. SNB’s President Schlegel didn’t offer any forward guidance
but he did say that the bar to cut rates further is very high and negative
inflation prints in the short-term won’t be enough.
The last Swiss inflation
prints rebounded a bit but there’s a long way to go before breaching their 2% inflation
limit. So, this leaves the CHF trading mostly based on the risk sentiment.
USDCHF
Technical Analysis – Daily Timeframe
USDCHF daily
On the daily chart, we can
see that USDCHF broke above the major downward trendline last week and extended the
rally into the 0.8075 level before pulling back a bit and then selling off on
Trump’s escalation. We can see that we have a major upward trendline now
defining the bullish momentum. The buyers will likely lean on the trendline with
a defined risk below it to position for a rally into the 0.8171 level. The
sellers, on the other hand, will look for a break lower to extend the drop into
the 0.7871 level next.
USDCHF Technical
Analysis – 4 hour Timeframe
USDCHF 4 hour
On the 4 hour chart, we can
see more clearly the recent price action. Again, the buyers will have a better
risk to reward setup around the trendline, while the sellers will continue to
step in around the 0.8072 level and look to increase the bearish bets on a
break below the trendline.
USDCHF Technical
Analysis – 1 hour Timeframe
USDCHF 1 hour
On the 1 hour chart, we can
see that we have a minor downward trendline that’s acting as resistance. The
sellers will likely continue to lean on it to keep pushing into new lows, while
the buyers will look for a break higher to increase the bullish bets into new
highs. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have Fed Chair Powell speaking although he’s
unlikely to change his stance given that we haven’t got anything new on the
data front. For now, we know that only the US CPI will be published despite the
shutdown, which is scheduled for Friday October 24.
