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Corrective Move Toward Support Could Strengthen Bullish Momentum
Forex
Economic
Summary:
A tactical retracement toward the 0.7926 area appears highly probable before the next leg up begins.
Buy
PENDINGUSDCHF
EXP
0.79300
Entry Price
0.80700
TP
0.67890
SL
0.80066 +0.00201 +0.25%
--
Point
PENDING
0.67890
SL
CLOSING
0.79300
Entry Price
0.80700
TP
Domestic indicators emerging from Switzerland continue to portray a fragile landscape for overall business activity. The SVME Purchasing Managers' Index (PMI) underwent a significant contraction in December, plummeting to 45.8 from the previous month's 49.7. This specific reading highlights a deepening recessionary trend within the Swiss manufacturing sector, emphasizing persistent structural vulnerabilities. Consequently, market participants have shifted their primary focus toward the upcoming Swiss inflation data scheduled for release this Thursday.
Current projections indicate that the Consumer Price Index (CPI) is likely to show a month-over-month decline of 0.1% for December, following a previous 0.2% contraction. Conversely, on a year-over-year basis, inflation is expected to see a negligible uptick to 0.1% from 0.0%. Any data print that falls below these conservative estimates could intensify concerns regarding a structurally low-inflation environment. Such a scenario might exert renewed pressure on the Swiss National Bank (SNB) to reconsider a pivot back toward negative interest rates to stimulate the economy.
In the United States, the latest ADP Employment Change report showed that private payrolls grew by 41,000 in December. Although this figure missed the consensus forecast of 47,000, it represents a substantial recovery compared to the 29,000 jobs lost in November, suggesting a tentative stabilization in hiring as the year closed. In tandem, the U.S. Department of Labor’s JOLTS report showed that job openings retreated to 7.146 million in November, down from October’s 7.449 million, signaling a gradual cooling in broad labor demand.
Providing a counterweight to the softening labor data, the Institute for Supply Management (ISM) reported a notable surge in the Services PMI, which climbed from 52.6 to 54.4 in December, easily beating the 52.3 estimate. A granular look at the data shows the Employment index returning to expansion at 52, while the Prices Paid component saw a slight moderation. This blend of resilient service sector activity and cooling labor metrics keeps the Federal Reserve in a cautious "wait-and-see" posture ahead of their late-January meeting. While service strength discourages aggressive monetary easing, the labor slowdown continues to build a fundamental case for gradual rate reductions.
Finally, geopolitical tensions are escalating due to renewed U.S. strategic interest in Greenland. The White House confirmed that President Donald Trump and his advisors are evaluating various acquisition options, with the administration stating that military force remains a potential tool. This rhetoric adds a significant layer of uncertainty to global risk sentiment, impacting currency valuations.
Technical Analysis
The USD/CHF pair is currently approaching a significant resistance ceiling at 0.7986. This level proved formidable on December 17th, when the price suffered a sharp bearish rejection from this exact zone. Given this historical context, we may witness another short-term rejection as sellers attempt to defend the area.
However, the prevailing short-term bias remains decidedly bullish; therefore, long positions are considered more favorable than counter-trend shorts. A tactical retracement toward the 0.7926 area appears highly probable before the next leg up begins. This specific level is bolstered by a historical support zone that has previously served as a launchpad for upward price action. Traders will be monitoring this region closely to join the primary trend at a more advantageous price.
Technical confluence further strengthens this support thesis. The 100 and 200-period Moving Averages (MAs) are currently situated at 0.7917 and 0.7961, respectively, providing a layer of dynamic support near the horizontal floor. Additionally, this zone aligns with the 0.50 and 0.618 Fibonacci retracement levels, creating a high-probability "buy zone."
Should the price exhibit a bullish reaction as it nears this confluence of indicators, long positions would be heavily favored. This setup offers a strategic entry point for those looking to capitalize on the sustained bullish momentum while maintaining a disciplined risk-to-reward ratio.
Trading Recommendations
Trading direction: Buy
Entry price: 0.7930
Target price: 0.8070
Stop loss: 0.67890
Validity: Jan 16, 2025 15:00:00
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