March 04, 2025 at 09:15AM
Fundamental
Overview
The USD is losing ground against
the major currencies as the market continues to price in more easing by the end
of the year. The market is now expecting three rate cuts by the end of the year
which is in stark contrast to just one seen a couple of weeks ago.
The US data recently
started to miss expectations by a big margin and the market reacted by
adjusting its growth expectations. The Trump’s tariffs policy is also weighing
on growth expectations increasing the likelihood of faster Fed easing down the road.
One constraint the Fed
might have could come from higher inflation expectations. In case we get a
slowdown, the Fed might not be fast enough in cutting rates amid inflation
remaining above target and uncomfortably high long-term inflation expectations.
This is something to keep in mind in light of the next NFP and CPI reports.
On the CHF side, nothing
has changed fundamentally although the recent strength in the Swiss Franc due
to risk-off flows solidified markets expectations for a 25 bps cut in March and
increased the total easing seen by year-end from 35 bps to 40 bps. Tomorrow, we
have the Swiss CPI report which might influence interest rates expectations.
USDCHF
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that USDCHF broke once again below the key 0.8960 support zone on the back of renewed tariffs fears. The
sellers piled in on the break to extend the drop into the 0.87 handle next. The
buyers, on the other hand, will want to see the price rising back above the
0.8960 level to start targeting new highs.
USDCHF Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price is now bouncing near the 0.8910 low. This is where we can expect
the buyers to step in with a defined risk below the low to position for a rally
back into the 0.8960 level. From a risk management perspective, the sellers would
be better off waiting for the pullback into the 0.8960 level to pile back in
for a move into new lows.
USDCHF Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a bounce into the
0.8960 level, while the sellers will wait for the opportunity to short at
better levels. The red lines define the average daily range for today.
Upcoming
Catalysts
Today the market participants will be on
the lookout for tariffs headlines as they go into effect for Canada, Mexico and
China. Tomorrow, we have the Swiss CPI, the US ADP and the US ISM Services PMI.
On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
