Last
week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported.
Yesterday, we got a strong US Retail Sales report
and the PBoC cut rates as China
is starting to stimulate more given its ailing economy. The market may be
worried now about inflation remaining higher for longer and the Fed forced to
do more.
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 is
slowly rising to the pullback target near the 0.8858 resistance where we
can also find the 50% Fibonacci retracement level
and the trendline. This is
where we should see strong sellers stepping in with a defined risk above the
trendline to target another selloff towards the lows. The bias for now remains
bullish as the moving averages have
crossed to the upside and the price has been printing higher highs and higher
lows.
USDCHF Technical Analysis –
4-hour Timeframe
USDCHF 4 hour
On the 4-hour chart, we can see that we are
starting to see a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see only pullbacks unless the US data
becomes ugly. The likely support for the buyers should be the upward trendline
around the 0.8750 level. That’s where we can expect to see a bounce to target
the 0.8858 resistance. The sellers, on the other hand, will want to see the
price breaking below the trendline to increase the chances of a reversal and
pile in to target the lows.
USDCHF Technical Analysis –
1-hour Timeframe
USDCHF 1 hour
On the 1-hour chart, we can see that we
have a resistance zone around the 0.8795 level as the price failed to extend
the rally above it multiple times. A break above this zone should see more
buyers piling in and take the price into the 0.8858 resistance. The sellers can
only wait for the break of the upward trendline as the bias remains bullish.
Upcoming Events
This week is a
bit empty on the data front and the most important release will be the US
Jobless Claims tomorrow. Readings in line with expectations shouldn’t be market
moving but big deviations should offer strong reactions. In fact, in case we
see a big beat, we can expect the USD to appreciate across the board, but with
a big miss, the greenback is likely to weaken as the market will price out the
hawkish expectations.