Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected. Nevertheless, the unemployment rate
fell once again and lessened the disappointment from the miss in the payrolls
number. The worse part for the Fed is that the average hourly earnings beat
expectations, and such high wage growth is not consistent with a sustainable
return to the 2% target. It’s worth reminding though, that the Fed will see
another NFP report before the September meeting, so this NFP doesn’t change much,
but the data leading into the meeting can still weigh on sentiment.
On the other hand, the SNB
raised interest rates by 25 bps as expected at the last meeting and
communicated that additional rate hikes cannot be ruled out as it maintains the
hawkish stance. The Switzerland CPI recently showed the inflation rate
easing even more within the SNB 0-2% target band and the Unemployment Rate ticking higher a little. Overall,
it looks like the SNB can pause at the next meeting, barring any upside
surprise before that date.
USDCHF Technical Analysis –
Daily Timeframe
USDCHF Daily
On the daily chart, we can see that USDCHF
continues its pullback towards the downward trendline and the
50% Fibonacci retracement level
around the 0.8858 resistance. The
short-term trend is clearly bullish as the price has been printing higher highs
and higher lows and the moving averages have
crossed to the upside. At the moment, the price is struggling to break above
the 0.8761 resistance, as we can see by the multiple rejections from the level,
and we can expect some consolidation here until the US CPI tomorrow.
USDCHF Technical Analysis –
4-hour Timeframe
USDCHF 4 hour
On the 4-hour chart, we can see that the price has
recently pulled back from the 0.8761 resistance into the previous swing high
support around the 0.87 handle where we had also the 38.2% Fibonacci
retracement level. The buyers stepped in there to target the 0.8858 resistance
but got rejected once again at the 0.8761 level. This is starting to look like
an ascending triangle pattern,
so a breakout on either side could lead to a quick move.
USDCHF Technical Analysis –
1-hour Timeframe
USDCHF 1 hour
On the 1-hour chart, we can see more
closely the current rangebound price action between the 0.8700 support and the
0.8780 resistance. The best strategy would be to wait for the US CPI tomorrow
and enter in the direction of the breakout. More aggressive buyers and sellers
may want to “play the range” by buying at support and selling at resistance
aiming for a better risk to reward setup.
Upcoming Events
This week the
main event will be the US CPI report on Thursday. The market is likely to focus
more on the Core readings as this is what the Fed is more interested in. Higher
than expected data should give the US Dollar a boost as the market’s
expectations will be skewed more on the hawkish side. On the other hand, lower
than expected readings should weigh on the USD as it would support the
soft-landing narrative in the short-term. At the same time of the US CPI data,
we will also see the latest US Jobless Claims report, which is less likely to
move the market since it’s released at the same time of the CPI, but big
surprises should have an effect, nonetheless. Finally, we conclude the week
with the University of Michigan Consumer Sentiment report on Friday where the
market is likely to focus more on the inflation expectations figures.