USD/CHF experienced a softening in Friday’s session, as the pair continued to decline following an unexpected increase in the US Unemployment Rate. Despite this, there was some positive news for the US, as Nonfarm Payrolls (NFP) for June exceeded market expectations. With inflation falling in both the US and Switzerland, there is speculation that both the Federal Reserve and the Swiss National Bank (SNB) could implement interest rate cuts.
The focus of attention on Friday was the surprising rise in the US Unemployment Rate to 4.1% from 4%, along with an increase in NFP of 206K, surpassing the market forecast of 190K. This uptick in NFP came after a revision to May’s figures, which showed a decrease from the initially reported number. Additionally, Wage Inflation, as measured by the change in Average Hourly Earnings, decreased to 3.9% from 4.1% year-over-year, in line with market expectations. This data has caused uncertainty about the health of the labor market and has led to increased market expectations of multiple interest rate cuts by both the Federal Reserve and the SNB.
Given the mixed economic data, market participants are now considering the possibility of two rate cuts by the Federal Reserve by the end of the year. September is seen as a likely contender for the first cut, with market odds reaching 90% according to the CME FedWatch tool. On the Swiss side, expectations for a third interest rate cut by the SNB in September have also increased following a slight decline in inflation data announced on Thursday. The odds of a rate cut by the SNB are now over 50%, as market sentiment shifts towards easing monetary policy.
In terms of technical analysis, the short-term outlook for USD/CHF has turned somewhat negative. The pair recently ended a six-day winning streak, with indicators such as the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) showing a loss of momentum. The pair is expected to close the week with slight losses, potentially dipping below the Simple Moving Average (SMA) on the daily chart. Key support levels for the pair are located at the 20-day SMA around 0.8950, while the next immediate resistance level is at the 100-day SMA near 0.8990, which was previously a support level. Overall, the technical indicators suggest a softening in the USD/CHF pair in the near term.
