6) USDCHF

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

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

• Resistance: 0.9270, 0.9350, 0.9400
• Support: 0.9125, 0.9100, 0.9070

The currency pair yesterday once again broke through the upper sideways level of 0.9206, but was stopped by the resistance level of 0.9270. Among the reasons for the growth of the currency pair, we can single out the obvious, increased demand for protection, as well as the presumptive general drop in demand for the Swiss franc. It is difficult to say what caused the sale of the Swiss franc, perhaps the actions of the SNB, perhaps something else. In terms of fear, the market is still reducing risk appetite, the value of the Fear-Greed indicator continues to decline. As a result, it dropped to 49 yesterday, which is still a neutral state, but closer to fear.

The reasons for fear, all the same, as recently as Sunday, we noted that alarming news about the new Omicron strain was still getting in the media. So now many associate the next wave of risk aversion precisely with the widespread distribution of Omicron throughout the world. More than 1.1 million new COVID cases were recorded in the US yesterday in the last 24 hours. The CDC recommends the use of 'better masks' for continuous wear against the Omicron strain. Plus disturbing news from China. Two cities in China have introduced lockdown Tianjin Hebei Province and Anyang Henan Province. A number of metropolitan areas in China have announced tightening restrictions, including Zhengzhou, the capital of Henan province, and Shenzhen, amid local cases of infection with the new Omicron strain.

All this has traditionally led to an increased demand for protection, and led to financial flows into a safe dollar. Also, the US dollar is again in demand amid growing approval of faster policy tightening by the Fed, as evidenced by the recent strong rise in US Treasury yields. In fact, the money markets have fully appreciated the possibility of a possible Fed hike in March and are expecting four interest rate hikes by the end of 2022.

Market expectations were bolstered by a controversial US employment report released on Friday, which highlighted labor market tensions. The unemployment rate fell more-than-expected to 3.9% and wages posted another month of strong gains, offsetting disappointment from the NFP publication. This, in turn, boosted the benchmark 10-year Treasury yield to 1.80% for the first time since January 2020. In addition to this, 2-year and 5-year US bonds, which are very sensitive to expectations of a rate hike, climbed to a two-year high and supported the US dollar.

In terms of macro data, neither the US nor Switzerland published anything yesterday.

Market participants are now eagerly awaiting a hearing on Fed Chairman Jerome Powell later during the US session to get new information on the timing and pace of monetary policy normalization. Then attention will turn to the release of the latest data on consumer inflation in the US tomorrow. This will play a key role in influencing the dynamics of the US dollar price and will give the currency pair a new directional impetus.

Tomorrow:
- 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.


#fx #trading #forex #analyze #MT4 #MT5 #USDCHF