Fundamental
Overview
The USD came under pressure
on Friday following the softer than expected US CPI report. The market pricing didn’t change much
as it was already very dovish going into the report, but given the positive
risk sentiment, the greenback remained on the backfoot.
Over the weekend, we got
some very positive comments from US Treasury Secretary Bessent as US-China held
trade talks in Malaysia. It looks like they’ve reached a deal, and we are now just waiting for
the Trump-Xi meeting on Thursday where the two leaders are expected to confirm
the positive developments.
The risk-on sentiment is
expected to weigh on the dollar in the short-term, although Treasury yields
could also erase the drop triggered by Trump’s escalation a couple of weeks
ago. This could create some tension between bullish and bearish drivers, but for
now there’s no strong reason for the dollar to rally amid the lack of key US
data.
The Fed is widely expected
to cut by 25 bps on Wednesday and keep the status quo given the lack of US
data. For this reason, the decision is likely to be a non-event.
On the CHF side, nothing
has changed. The SNB left interest rates steady and kept everything unchanged
at the last meeting. SNB’s President Schlegel didn’t offer any forward guidance
but he did say that the bar to cut rates further is very high and negative
inflation prints in the short-term won’t be enough.
The last Swiss inflation
prints rebounded a bit and the central bank does expect some increases in the
next quarters, but there’s a long way to go before breaching their 2% inflation
limit. So, this leaves the CHF trading mostly based on risk sentiment.
USDCHF
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCHF bounced around the key 0.7872 level and it’s now trading in the
middle of the two key levels at 0.8073 and 0.7872. There’s not much we can
glean from this timeframe, so we need to zoom in to see some more details.
USDCHF Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price rejected the downward trendline and bounced around the
0.7940 support. We got another rally into the trendline, but it looks like it
failed again. From a risk management perspective, the buyers will likely
continue to step in around the support to keep targeting a break above the
trendline and the 0.7980 resistance.
The sellers, on the other
hand, will look for a break below the support to start targeting the 0.7872
level. In case the price rallies into the resistance though, we can expect the
sellers to pile in there with a defined risk above the resistance to position
for a drop into new lows.
USDCHF Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as market participants will likely continue to play the range until we get a breakout on either side. The red lines define the average daily range for today.
Upcoming
Catalysts
On Wednesday we have the FOMC policy decision, while on Thursday,
we have the Trump-Xi meeting.
This article was written by Giuseppe Dellamotta at investinglive.com.