Basic overview
The US Dollar is still consolidating around the highs although it is stronger against commodity currencies. In the bigger picture, the market reached a peak in interest rate repricing, and stronger reasons will be needed to price the remaining rate cuts for 2025.
In fact, despite a lot of strong data from the US, the market is still pricing in around three rate cuts by the end of 2025. The focus is now on the US CPI report due tomorrow. It seems the Fed really wants to cut next week before pausing for several months. Therefore, we may need an upside surprise in the headline inflation numbers to make them change plans.
Even if the Fed decides to cut next week despite a hot CPI, the market is likely to ease further with the rate cut expectations for 2025 and that could slightly risk disruption caused by the general accumulation of the US Dollar. The best conditions would be a soft report with the conditions far too far behind the green. In such a case, we can expect the US Dollar to sell across the board.
On the CHF side, the market is pricing in a 63% probability of a 50 bps cut for the SNB this week. Inflation has been much lower than the central bank's forecasts and the strength of the Swiss Franc has not helped either.
The new Chairman of the SNB Schlegel seems more confident than before negative levels indicated if needed to reduce the appetite for the safe haven franc, so the central bank may go for a 50 bps cut this time.
USDCHF Technical Analysis – Daily Chart
USDCHF per day
On the daily chart, we can see that USDCHF broke below the uptrend line of motion that explained the positive trend in this timeframe. We can expect the sellers to enter around these levels to set up for a drop to lower levels. On the other hand, the buyers will want to see the price rise back above the trend line to target new highs.
USDCHF Technical Analysis – 4 Hour Timeframe
USDCHF 4 hours
On the 4 o'clock chart, we can see that we have a strong support turned against around the 0.88 handle with a downward trend defining the bearish trend on this timeframe. We can expect the sellers to step in both at the front and the trend line in case the resistance goes away. On the other hand, the buyers will pile in at all higher breaks.
USDCHF Technical Analysis – 1 hour timeframe
USDCHF 1 hour
On the 1 hour chart, we can see more clearly the consolidation under the resistance. The sellers will continue to step in here to target a drop to new levels, while the buyers will look for a higher break to rally into the trend line. The red lines define the
average daily range for today.
Catalysts to come
Tomorrow we get the US CPI report, which is also going to be the highlight of the week. On Thursday, we have the SNB rate decision, US Jobless Claims and US PPI.
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