USD/CHF loses the 20-day SMA after weak labour market figures from the US

Highlight

• USD/CHF declined for a third consecutive day to 0.87800, below the 20-day SMA of 0.8800.

• US JOLTs from July came in lower than expected, which fueled a decrease in US bond yields.

• Hawkish bets on the Fed for November remain high—markets pricing in rate cuts In June 2024.

On Tuesday, the USD experienced a downturn triggered by disappointing US labor market statistics. This, in turn, lessened the yield on US Treasury bonds, causing the USD to falter in its demand in foreign exchange markets. However, the anticipated tightening policies of the Federal Reserve (Fed) are still in place, which may help to mitigate further losses for the US Dollar. Note that there will be no significant announcements on the CHF front during the upcoming session.

The US reported weak labour market figures as the Job Openings and Labor Turnover Survey (JOLTS) decreased to 8.82 million. In contrast, the markets expected a reading of 9.465 million and decelerated from the last revised reading of 9.165 million. As a reaction, the US 2-year Treasury yield sharply decreased, more than 3% to 4.87%, as investors considered that the Federal Reserve would conduct its monetary policy decision “carefully” as stated by Jerome Powell at the Jackson Hole Symposium.

Focus now shifts to additional data released during the week, including ADP Employment Change and Nonfarm Payrolls from August, Gross Domestic Product (Q2) preliminary figures, and the Core Personal Consumption Expenditures (PCE) from July.

In the meantime, markets continue to bet on high chances of a 25 basis point hike by the Fed in November, which, according to the World Interest Rate Probabilities (WIRP) rose to nearly 70%. However, yields seem to be decreasing as markets adjusted their rate cuts expectations down to June from July.

USD/CHF Levels to watch

Looking at the daily chart, it seems the short-term outlook for USD/CHF is bearish. Both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicate a sluggish buying pace. Furthermore, the RSI holds a position above its midline displaying a downward inclination, further pointing to a weakening bullish momentum. The MACD too, reveals red bars, further consolidating the dwindling strength of the bullish sentiment. In terms of position, while the currency pair is above the 20-day Simple Moving Average (SMA), it lies beneath the 100 and 200-day SMAs. This placement suggests that the bullish push has not ended and the short term outlook remains positive.

Support levels: 0.8770, 0.8750, 0.8730.

Resistance levels: 0.87850 (20-day SMA), 0.8800, 0.8890 (100-day SMA).

USD/CHF Daily Chart