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USDCHF Technical Analysis | Forexlive

On the
daily chart below, we can see that the price got rejected from the 0.9118 resistance and it’s
now pulling back towards the 0.9006 support where we can also find the red 21 moving average. May was
a great month for the USD as strong economic data made the market to price in
more rate hikes and price out the rate cuts expected by the end of the year.

However,
as we reached peak hawkishness, some Fed members signalled the
possibility of skipping the June hike to see more data and then decide
whether to hike in July. Moreover, yesterday we got soft readings in the ISM Manufacturing PMI and Unit Labour Cost reports,
which increased the unwind in USD longs. All of the above contributed to the
recent weakness in USDCHF and if the data keeps on missing, we may see USDCHF
at the lows pretty soon.

USDCHF Technical Analysis

On the 4
hour chart below, we can see that USDCHF is testing the upward trendline once
again. This trendline has provided many entry points for the buyers in the past
weeks, so we should see them defending this level again to position for another
rally above the 0.9150 high.

If we do
get a break lower though, the last line of defence will be the 0.9000 support
as that’s where we find the daily 21 moving average. The sellers, on the other
hand, will start to pile in more aggressively if the price breaks below the
trendline and increase the bearish momentum if USDCHF eventually breaks the
0.9000 support.

On the 1
hour chart below, we can see more closely the current technical setup. We have
3 different entry points for the buyers:

  • More
    aggressive buyers may lean on this trendline with a
    defined risk just below it to target the break of the 0.9150 high.
  • Alternatively,
    they can lean on the last line of defence at the 0.9000 support.
  • More
    conservative buyers should wait for USDCHF to break above the downward
    trendline to pile in and extend the eventual rally to new highs.

The
sellers, on the other hand, should pile in on every breakout:

  • If the
    price breaks below the upward trendline, the target will be the breakout of the
    0.9000 support to
    eventually reach the lows.
  • If the
    price breaks below the 0.9000 support, then the sellers will increase the
    bearish momentum and we may see USDCHF back at the lows pretty quickly.

Today, all eyes will be on
the US NFP report as different scenarios may unfold:

  • If
    the data exceeds expectations, accompanied by higher-than-anticipated average
    hourly earnings, it is likely to heighten the likelihood of a rate hike in June
    and potentially even factor in the possibility of a rate hike in July. This
    particular scenario may raise concerns in the market regarding a potential
    escalation of wages and ultimately prices.
  • Conversely,
    if the data is positive but falls short of expectations in terms of average
    hourly earnings, it is expected to further weaken the USD, as it would not
    significantly impact rate expectations and may even trigger soft landing vibes.
    The market will then focus on the forthcoming CPI report scheduled for next
    week.
  • Should
    the data fall short of expectations across all areas, it will be perceived as
    negative news and could potentially trigger risk aversion in the markets,
    leading to CHF strength. Moreover, based on recent comments made by Fed
    officials, we might also see USD weakness due to reduced expectations
    surrounding future interest rate hikes.