6) USDCHF

Technical Analysis (MA, RSI, STOCH, MACD, ADX)

• M30 - DOWN
• H1 - DOWN
• H4 - DOWN
• D1 - RANGE
• W1 - RANGE
• MN - DOWN

• Resistance: 0.9206, 0.9270, 0.9350
• Support: 0.9125, 0.9100, 0.9070

The currency pair traded in different directions this week, but the upward direction was still the main one. Thus, the currency pair was trading in a range of 130 pips this week, while closing +85 pips. There were a lot of drivers, there were also marked data, as well as a reduced demand for protection. At the end of Friday, the market remains in a neutral state, the value of the Fear-Greed indicator points to 52.

Periodically, the media get disturbing news about the new strain-Omicron, but globally, optimism now prevails. Every day, there is more and more evidence that the Omicron COVID-19 strain is less dangerous than previous strains such as Delta. This option is very contagious, so it puts a lot of pressure on health systems, but the markets are encouraged by the reluctance of governments of different countries to impose very tough restrictions, in any case, the authorities react, but much more restrained than before. All of this is undermining demand for safe assets like the Swiss Franc and the US dollar, bringing fundamental drivers to the fore.

In the first week of the year, the inflation rate for Switzerland was published. The SNB's forecasts of a short-term rise in inflation were confirmed by the latest publication of the consumer price index for December, which stood at 1.5% yoy. Such a high value for Switzerland is already a reason to think about the plans of the SNB, since the 2% target has not been revised, as has been done by other central banks. In other words, if inflation continues to rise in Switzerland, the moment may come when the SNB will be forced to tighten monetary policy.

In the US, this week was full of surprises and news, first the hawkish minutes of the December Fed meeting, in which almost all politicians agreed on the need to reduce the Fed's balance sheet immediately after the first interest rate hike. After a very positive report from ADP, but market participants were waiting for the official NFP data, which was very ambiguous.
Nonfarm Payrolls data in the US on Friday was a big disappointment for the second month in a row. Only 199,000 jobs were created in December, less than half of the projected 400,000. Average hourly wages rose 4.7% in December and 5.1% in November as employers continue to push workers to return, and of course they try to offset high inflation. Nonetheless, the unemployment rate improved markedly, falling to 3.9% from 4.2% last month.

The first reaction of the market, of course, is a sale, but after a more detailed study, many revised their attitude. Of course the overall NFP was weak, but the labor market as a whole strengthened in December, as evidenced by declining unemployment and rising wages. This may be enough for the Fed to raise interest rates in March.

In the coming week there will be many important events and publications in the United States, we do not expect any news in Switzerland at all:
Tuesday:
- Speech by the head of the Federal Reserve, Mr. Powell
Wednesday:
- US Core Consumer Price Index (CPI) (YoY) (Dec)
- US Consumer Price Index (CPI) (YoY) (Dec)
Thursday:
- Number of initial applications for unemployment benefits in the United States
- Producer Price Index (PPI) MoM (Dec)
Friday:
- Baseline Retail Sales Index (MoM) (Dec)

We expect that the Fed's monetary tightening will tend to boost not only short-term, but also medium and long-term US yields over 2022. We also expect the yield curve on the 2-10 year bonds to flatten out. It is possible that the yield on 10-year US Treasuries will rise to 2% by the end of 2022. The rise in Treasury yields will lead to a steady rise in the US dollar. All this makes the upward direction the main one in the medium and long term.

In order to be sure that the currency pair has returned to the trend state, it is necessary to see a breakdown of the important resistance level of 0.9400. By the breakdown of which, we can more confidently say that the bulls gained the upper hand in the currency pair, and the currency pair came out of the side in which it was hanging for months.


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