USD/CHF consolidates below the 20-day SMA as the US economic outlook worsens

USD/CHF dropped to 0.8775, below the 20-day SMA of 0.8780.
ADP job creation figures from the US from August came in lower than expected, and the Q2 GDP was revised lower.
Lower US yields and dovish bets on the Fed, weight on the USD.

In Wednesday’s session, the USD is trading weak against most of its rivals, driven by the report of weak economic figures. The Greenback had gained momentum against its rivals as its economy was resilient during the Federal Reserve (Fed) tightening cycle. Still, the report of soft economic figures warns investors that the lags of monetary policy may be kicking in. On the Swiss side, ZEW reported soft expectations figures from August.

The August survey from Automatic Data Processing (ADP), which gauges employment creation, indicated the generation of 177,000 jobs in the US. This figure fell short of the anticipated 195,000 and significantly declined from 371,000. Moreover, the second-quarter YoY Gross Domestic Product (GDP) underwent a downward revision, settling at 2.1%.

Reacting to the data, the USD, measured by the DXY index, dropped to 103.05, below its 200 and 20-day Simple Moving Averages, while the US Treasury yields continued to decrease and fell to their lowest in three weeks. In line with that, the markets continue to price in high odds of at least one more hike by the Federal Reserve (Fed) within this cycle, but the rate cut expectations have now been pushed to June 2024 from July.

Focus now shifts to Core Personal Consumption Expenditures (PCE) from July on Thursday, an essential gauge for inflation for the Fed. On Friday, markets will get the August Nonfarm Payrolls (NFP).

On the CHF side, the ZEW Survey of Expectation from August dropped higher than expected to -38.6 vs. the -31.3 expected, limiting the Swiss currency upside.

USD/CHF Levels to watch

As per the daily chart analysis, the USD/CHF has a bearish technical bias for the short term, with both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) residing in negative territory. The RSI also exhibits a southward slope below its midline, emphasising the presence of intense selling pressure. At the same time, the MACD, with its red bars, highlights the strengthening bearish momentum for the USD/CHF. Moreover, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), pointing towards the prevailing strength of the bears in the larger context and the buyers facing a challenging situation.

Support levels: 0.8750, 0.8730, 0.8700.

Resistance levels: 0.8782 (20-day SMA), 0.8800, 0.8890 (100-day SMA).