Fundamental
Overview
The USD rallied across the
board yesterday following an aggressive selloff in the GBPUSD pair as the UK
30yr yield jumped into a new cycle high. Some of the gains were eventually
erased but the greenback remained supported as the price action continues to be
choppy as we head into the key US data.
In fact, traders will be
focused on the US ADP and NFP reports. The data will influence interest rates
expectations greatly. Right now, the market is pricing a 91% probability of a
rate cut in September and a total of 55 bps of easing by year-end.
Strong data might take the
probability for a September cut towards a 50/50 chance but will certainly see a
more hawkish repricing further down the curve and likely support the dollar.
Soft data, on the other hand, will likely see traders increasing the dovish
bets with a third cut by year-end being priced in and weighing on the
greenback.
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% limit.
USDCHF
Technical Analysis – Daily Timeframe
USDCHF Daily
On the daily chart, we can
see that USDCHF is compressing between two trendlines. The sellers stepped in around the
top trendline to target a drop into the bottom trendline. If we get there, we
can expect the buyers to lean on the trendline with a defined risk below it to
position for a rally back into the top trendline targeting a break above it.
USDCHF Technical
Analysis – 4 hour Timeframe
USDCHF 4 hour
On the 4 hour chart, we can
see more clearly the price action between the two trendlines. In the bigger
picture, this could turn into a bullish flag if we get an upside breakout. But
if the price breaks out to the downside, it should technically invalidate the
pattern and increase the bearish momentum.
USDCHF Technical
Analysis – 1 hour Timeframe
USDCHF 1 hour
On the 1 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe where the price bounced off of. The buyers will likely continue to
lean on the trendline to keep pushing into new highs, while the sellers will
look for a break lower to increase the bearish bets into the major bottom
trendline. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Job Openings data.
Tomorrow, we get the Swiss CPI, the US ADP, the latest US Jobless Claims
figures and the US ISM Services PMI. On Friday, we conclude the week with the
US NFP report.
