In Friday’s trading session, the USD/CHF pair saw a strong recovery, surging above the 0.8965 mark. This movement was mainly driven by the release of strong Nonfarm Payroll data from the US, which surpassed market expectations. As a result, market sentiments are leaning towards a more hawkish stance by the Federal Reserve, creating divergences with the Swiss National Bank that may benefit the USD.
The newly reported NFP figures for May showed an expansion to 272K, up from the revised reading of 165K in April. This exceeded market estimates of 185K and led to a decrease in the likelihood of a Fed rate cut in September. Additionally, the Unemployment Rate in the US rose to 4%, and the Labor Force Participation Rate slightly declined. The Average Hourly Earnings also experienced growth, indicating wage inflation.
Following the release of the data, US Treasury yields spiked, with the 2, 5, and 10-year rates reaching 4.80%, 4.44%, and 4.41%, respectively. This increase in yields contributed to the USD gaining interest in the markets.
In contrast, the SNB has been on an easing cycle, cutting rates by 25 bps in their March meeting to reach 1.5%. Market expectations now suggest a 55% chance of another rate cut in the upcoming June 20 meeting.
From a technical perspective, the USD/CHF pair has shown signs of recovery, with indicators moving out of oversold territory. The RSI is hovering near 50, indicating a more balanced market, while the MACD is reporting smaller red bars. The pair has also moved above the 100 and 200-day SMA barriers, strengthening the short-term bullish outlook. The 200-day SMA provides additional support against potential losses. Overall, the USD/CHF pair seems to be in a favorable position for further gains in the near future.
In conclusion, the USD/CHF pair saw a significant recovery on Friday following strong NFP data from the US. Market sentiments favor a more hawkish stance by the Federal Reserve, which could benefit the USD in the near term. Meanwhile, the SNB is expected to continue its easing cycle, potentially leading to further divergences between the two central banks. From a technical perspective, the USD/CHF pair has shown signs of a bullish outlook, with indicators suggesting further upside potential. Traders will be keeping a close eye on upcoming economic data and central bank meetings to gauge the future direction of the USD/CHF pair.
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