USDCHF Analysis – wait for the Fed decision

USD/CHF is currently trading at 0.9601 with a high of 0.9612 and a low of 0.9539. Yellen will speak Friday from the Fed’s summer retreat at 10 a.m. Eastern. The subject of her remarks is “The Federal Reserve’s Monetary Policy Toolkit.” Fed Chairwoman Janet Yellen may use her speech in Jackson Hole to start the race for a rate hike as soon as September. Many analysts see Jackson Hole as the ‘ready’ warning and look for Chair Yellen to err on looking at the optimistic side” of the outlook ”, they also thinks the U.S. central bank won’t issue the “set” warning until its September meeting policy statement and then “go” at the December meeting (But many economists think the central bank could “go” in September if the jobs data is strong).

The Labor Department has reported two strong months of employment gains — 255,000 for July and 292,000 for June. If the August employment report, scheduled for release on Sept. 2, is solid, then we expect the Fed to raise rates at its September meeting ( this will be "bullish" case for U.S dollar, some analysts think that the Fed will wait for its Dec. 13-14 meeting with rate hike). Any inkling of imminent Fed tightening should make the dollar stronger and move the U.S. yield curve higher relative to other markets. The U.S. central bank is within reach of its twin targets of maximum sustainable employment and an inflation rate of 2%, said Federal Reserve Vice Chairman Stanley Fischer on Sunday, suggesting he is open to further interest rate hikes this year. Fischer said the U.S. labor market has been “remarkably resilient” despite several shocks from overseas. Although Fischer did not say it, the suggestion is that with the Fed so close to its goals, it no longer has to keep monetary policy so loose and can snug up interest rates. Fischer is a member of Fed Chairwoman Janet Yellen’s inner-circle and his views are followed closely by investors. His remarks are similar to recent comments from other close Yellen allies, New York Fed President William Dudley and San Francisco Fed President John Williams, who said the economy could likely handle another rate hike.

There were no major changes in Swiss unemployment data, which remained stable at 3.1% in July and 3.3% when seasonally adjusted. The franc remains largely overvalued and the true impact this has on the economy still needs to be assessed. Brexit vote is still too recent for anyone to properly appraise the implications for the Swiss economy. For the time being it has forced the SNB to massively intervene to defend the swissie, which has increased its balance sheet. At some point, a monetary expansion program could also be required to help Switzerland fight in this currency war. Higher unemployment rates would raise deflation issues and as a result cause the SNB to take a step forward.

Tehnical analysis

When we look at the monthly chart of this pair we see that long trend is bearish (downtrend). On this chart I marked support and resistance levels, 1.0000 (resistance) and 0.9000 (support) levels represent current trading range and breaking above/below this levels would open way to 1.1000 (resistance 2) or 0.8000 ( psychological support).



On this weekly chart we can see that USD/CHF bottomed at 0.7417 level and after that started to rise. I also marked support and resistance levels, 1.0000 and 0.9900 ( line which I marked on this chart also represents resistance) and 0.9500 (support) levels represent current trading range and breaking above/below this levels would open way to 1.1000 (resistance 2) or 0.9400. First sign of recovery and "BUY" signal would be if the price jumps above this line and above 0.9900 level, than we have open way to 1.0000 resistance level (very good position for short term traders).If the price falls below 0.9600 ( psychological support) we have open way to 0.9539 day low, breaking below 0.9500 we have open way to 0.9400.