Fundamental
Overview
The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.
In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report due
tomorrow. It looks like the Fed really wants to cut next week before pausing
for some months. So, we might need an upside surprise in the core inflation
numbers to force them to change plans.
Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.
On the CHF side, the market
is pricing in a 63% probability of a 50 bps cut for the SNB this week.
Inflation has been much lower than the central bank’s forecasts and the
strength in the Swiss Franc didn’t help either.
The new SNB’s Chairman
Schlegel seems more resolute than his predecessor as he flagged
negative rates if
needed to dampen the appetite for the safe-haven franc, so the central bank
might go for a 50 bps cut this time around.
USDCHF
Technical Analysis – Daily Timeframe
USDCHF Daily
On the daily chart, we can
see that USDCHF broke below the upward trendline that was defining the bullish
momentum on this timeframe. We can expect the sellers to pile in around these
levels to position for a drop into new lows. The buyers, on the other hand,
will want to see the price rising back above the trendline to target new highs.
USDCHF Technical
Analysis – 4 hour Timeframe
USDCHF 4 hour
On the 4 hour chart, we can
see that we have a strong support
turned resistance around the 0.88 handle with a downward trendline defining
the bearish momentum on this timeframe. We can expect the sellers to step in
both at the resistance and the trendline in case the resistance gets breached.
The buyers, on the other hand, will pile in at every break higher.
USDCHF Technical
Analysis – 1 hour Timeframe
USDCHF 1 hour
On the 1 hour chart, we can
see more clearly the consolidation below the resistance. The sellers will
continue to step in here to target a drop into new lows, while the buyers will
look for a break higher for a rally into the trendline. The red lines define the
average daily range for today.
Upcoming
Catalysts
Tomorrow we get the US CPI report, which is also going to be the main event of
the week. On Thursday, we have the SNB rate decision, the US Jobless Claims and
the US PPI.
