Technical Analysis: Following disappointing US data, the USDCHF pair breached the low, but the strength of the bearish momentum is now diminishing. What can be expected in the next moves?
USD
- As anticipated, the Fed maintained interest rates while essentially making no changes to its statement.
- Fed Chair Powell emphasized once more that cautious steps are being taken since the full impact of tightening policy has not yet been felt.
- The recent US CPI fell short of all forecasts, which raised the prospect of rate cuts.
- The last NFP data missed all the mark, and continuing claims are now growing quickly, both of which are signs of deterioration in the labor market.
- Both the University of Michigan Consumer Sentiment Index and US Consumer Confidence are still declining.
- The most recent US ISM Manufacturing PMI fell well short of forecasts, while the ISM Services PMI, while still expanding, was also disappointing.
- US PPI estimates were significantly underestimated, yet recent US retail sales exceeded expectations.
- The Fed may be finished with this cycle, as the inflation data from last week essentially affirmed, despite the Fed’s recent more aggressive rhetoric.
- Market expectations of a Fed rise have diminished.
CHF
- The SNB maintained interest rates at 1.75%, as opposed to the 2.00% predicted since it believes that the recent notable tightening has offset the residual inflationary pressures.
- Though the current circumstances do not necessitate any more tightening, SNB Governor Jordan stated that the central bank will not hesitate to tighten monetary policy further if necessary.
- Although the CPI in Switzerland increased somewhat lately, the headline and core measure inflation rates are both safely within the SNB’s target range of 0-2%.
- The unemployment rate was close to cycle lows, matching the prior reading.
- While the Services PMI continued to expand, the Manufacturing PMI missed estimates and continued to decline.
- The market no longer anticipates an increase from the SNB.
Technical Analysis of USDCHF – Daily Timeframe
As the US Dollar was recently impacted by the dismal US statistics, we can observe on the daily chart that USDCHF broke below the low of 0.8888. The price has been making lower highs and lower lows, and the moving averages are crossed to the downside, which has skewed the bias to the negative. The sellers would be better off taking a short position at the downward trendline, which also happens to be the confluence point of the red 21 moving average, the previous swing bottom, and the 50% Fibonacci retracement level.
