Fundamental
Overview
The USD sold off across the
board on Friday following another soft NFP report. The dovish bets on the Fed
increased as a result and the market is now expecting three rate cuts by
year-end (70 bps). Moreover, we have also a 10% probability of a 50 bps cut in
September but that will likely happen only if we get a soft CPI report on
Thursday. In that case, the greenback will likely weaken further into the FOMC
meeting.
Overall, if one zooms out,
the US dollar continues to range although the dovish bets on the Fed keep
weighing on the currency. Part of that could be the fact that the bearish
positioning on the dollar could be overstretched and we might be at the peak of
the dovish pricing.
In fact, if the rate cuts
trigger stronger economic activity in the next months, the rate cuts in 2026
could be priced out and support the dollar. Nevertheless, the trend is still
skewed to the downside, and we might need strong data to reverse it.
On the CHF side, we haven’t
got anything new in terms of monetary policy as the SNB is now in a long pause.
The last Swiss CPI showed a slight improvement in inflation but even if we get
more such reports, it won’t change anything for the SNB given that there’s a
long way to go before breaching their 2% inflation limit. On the other hand,
the central bank is very reluctant to cut rates into negative territory, so
this leaves the CHF trading based on weakness and strength of other currencies.
USDCHF
Technical Analysis – 4 hour Timeframe
USDCHF 4 hour
On the 4 hour chart, we can
see that the price is near a key swing level at 0.7910. This is where we can
expect the buyers to step in with a defined risk below the level to position
for a rally into the 0.7985 resistance.
The sellers, on the other hand, will look for a break lower to increase the
bearish bets into the 0.7870 level next, although from a risk to reward
perspective, the sellers would have a better setup around the 0.7985 resistance
zone.
USDCHF Technical
Analysis – 1 hour Timeframe
USDCHF 1 hour
On the 1 hour chart, there’s
not much else we can add here but on an intraday basis, a break above the most
recent swing high at 0.7946 could see the buyers extending the pullback into
the 0.7985 resistance next. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the US PPI report. On Thursday, we get the US
CPI report and the latest US Jobless Claims figures. On Friday, we conclude the
week with the University of Michigan Consumer Sentiment report.
