- 29/08/2023 17:25:09 GMT
- The USD/CHF pair recorded its third successive daily decline, reaching 0.87800 and falling beneath the 20-day Simple Moving Average (SMA) positioned at 0.8800.
- The US Job Openings and Labor Turnover Survey (JOLTs) data for July fell short of expectations, resulting in a decline in US bond yields.
- Despite this, anticipations of a more aggressive stance from the Federal Reserve for November continue to be substantial, with the market factoring in the probability of interest rate reductions in June 2024.
On Tuesday, the US dollar encountered selling pressure following the release of lackluster labor market data from the United States. The decline in American Treasury bond yields contributed to the USD’s struggle to attract demand within the foreign exchange markets. Nonetheless, expectations of tightening measures by the Federal Reserve (Fed) remain intact, potentially mitigating the downside for the US currency. On the Swiss franc (CHF) front, no significant releases are scheduled for the session.
The US labor market figures revealed weakness, with the Job Openings and Labor Turnover Survey (JOLTS) dropping to 8.82 million. This figure contrasted with market projections of 9.465 million and represented a slowdown from the previous revised figure of 9.165 million. Consequently, the yield on the US 2-year Treasury bond experienced a substantial decrease of over 3%, reaching 4.87%. This adjustment stemmed from investors’ consideration that the Federal Reserve would approach its monetary policy decisions with caution, as emphasized by Jerome Powell during the Jackson Hole Symposium.
The upcoming week turns attention to a range of additional data releases, including the ADP Employment Change and Nonfarm Payrolls figures for August, as well as preliminary Q2 Gross Domestic Product (GDP) figures and the Core Personal Consumption Expenditures (PCE) data from July.
Simultaneously, market focus remains on the prevailing expectations, with significant anticipation of a 25 basis point increase by the Federal Reserve (Fed) in November. This outlook is underscored by the World Interest Rate Probabilities (WIRP) metric, which has climbed to almost 70%. However, market yields appear to be declining, as investor expectations for rate cuts have been adjusted, now projecting the possibility of such cuts in June as opposed to the previously estimated July timeframe.
USD/CHF Levels to watch
Upon analyzing the daily chart, the USD/CHF currency pair presents a bearish stance in the near term. Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicate a subdued buying momentum. The RSI rests above its midline but exhibits a downward slope, suggesting weakening strength. Similarly, the red bars on the MACD reinforce the diminishing bullish momentum. Despite this, the pair maintains a position above the 20-day Simple Moving Average (SMA), while residing below the 100 and 200-day SMAs. This positioning implies that the bullish sentiment still persists for the short term, although the bearish indicators warrant caution.
Key support levels to monitor include: 0.8770, 0.8750, 0.8730.
On the upside, notable resistance levels are: 0.87850 (20-day SMA), 0.8800, and 0.8890 (100-day SMA).