USDCHF Technical Analysis – The USD weakens as the Fed becomes more dovish

Fundamental
Overview

Last Friday, Fed Chair
Powell delivered a more dovish than expected speech at the Jackson Hole Symposium as he
basically kept the door open for a 50 bps cut at the September meeting. In
fact, the line saying that they will do everything they can to support a strong
labour market was key.

That pushed Treasury yields
lower and weighed on the US Dollar across the board giving the Swiss Franc a
boost as the carry trades continue to lose some appeal. Nonetheless, the Fed is
cutting rates into a resilient economy, so one has to be mindful that we might
eventually get an increase in economic activity that could lift long term
yields.

That might not be the
market’s focus at the moment because we will need a catalyst to change the
narrative. The focus right now is on the US labour market data as more
weakening could not only trigger a more aggressive Fed easing but also bring
back recessionary fears which should support the CHF.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF broke below the key 0.8550 level following the dovish Powell’s
speech and extended the drop into the 0.8450 level. The sellers remain in
control for now and they will keep targeting the 0.8333 level. If the price
gets there, we can expect the buyers to step in with a defined risk below the
level to position for a rally into new highs.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the sellers will have a better
risk to reward around the 0.8555 level where they will also find the 38.2% Fibonacci
retracement level for confluence.
The buyers, on the other hand, will want to see the price breaking higher to increase
the bullish bets into the major trendline
around the 0.8650 level.

USDCHF Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is currently confidence in a tight range between the 0.8455
support and the 0.8485 resistance. The buyers will want to see the price
breaking higher to position for a rally into the 0.8555 level, while the
sellers will look for a break lower to increase the bearish bets into the
0.8333 level. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Consumer Confidence report. On Thursday, we get the
latest US Jobless Claims figures. On Friday, we conclude with the US PCE
report.