USDCHF showed a third consecutive session of gains, supported by the US Dollar bulls. As a result of market sentiment indicating that the Federal Reserve is not likely to reduce interest rates at its March meeting, the US Dollar (USD) gained strength. This sentiment was influenced by the positive employment data released in the United States on Friday.
A Rate Cut Is Too Early
Nonfarm Payrolls added 353K jobs in January, according to the US Bureau of Labor Statistics (BLS), exceeding the previous estimate of 333K and the market consensus of 180K. The Average Hourly Earnings (MoM) for January exceeded the anticipated 0.3% and the previous month's figure of 0.4%, reaching 0.6%. January saw a stable unemployment rate of 3.7%, consistent with market expectations of 3.8%.
The US Federal Reserve (Fed) Chair, Jerome Powell, reaffirmed that initiating a rate cut at the March meeting might be too early. The speaker underscored the importance of exercising prudence when determining the optimal moment to implement rate adjustments.
In addition, President of the Chicago Federal Reserve (Fed) Bank Austan Goolsbee stated on Friday that the robust employment expansion in the United States in January does not warrant delaying interest rate decreases. However, he perceives this as validation that the labor market continues to be robust and is not approaching a state of weakness.
What's For the CHF?
According to the most recent data from the Swiss Manufacturing Purchasing Managers Index (PMI), production growth in Switzerland marginally improved but failed to meet the market's expectations. Despite surpassing market expectations with a surge in Gross Domestic Product, Swiss Real Retail Sales and Consumer Demand have declined.
As a result, market sentiment is predominantly pessimistic regarding implementing the initial rate cut by the Swiss National Bank (SNB) in September 2024, consistent with consensus expectations.
USDCHF Technical Analysis
In the daily chart of USDCHF price, extreme selling pressure found a bottom at the 0.8330 area from where a bull run appeared. Also, the bottom came as a new low below the existing 0.8553 support level. As the recent price showed a decent recovery above this level with a bullish CHoCH formation, we may expect strong upward pressure in the coming days.
On the bullish side, there is an unmitigated place (0.8900 to 0.9000 area), which would be the first target on the possible bull run. The high volume level since October 2023 aligns with the imbalance zone, suggesting a bullish possibility as a mean reversion.
On the bearish side, the dynamic 20-day EMA would be the major barrier. Investors should monitor how the price trades above this line. A selling pressure 0.8800 to 0.8730 zone with a daily candle below the 20 DMA could signal a continuation of the bearish trend towards the 0.8300 area.