USD/CHF advances to 0.8070, nearly two-week high amid stronger USD ahead of NFP report

USD/CHF scales higher for the fifth straight day amid sustained USD buying interest.
The risk-on impulse undermines the safe-haven CHF and further supports the major.
Traders now look forward to the delayed US NFP report for some meaningful impetus.

Haresh Menghani FXStreet

The USD/CHF pair gains positive traction for the fifth consecutive day and climbs to a nearly two-week high during the Asian session on Thursday. Spot prices currently trade around the 0.8065-0.8070 region, up nearly 0.10% for the day, and seem poised to appreciate further amid the underlying bullish sentiment surrounding the US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to its highest level since late May on the back of less dovish Federal Reserve (Fed) expectations. In fact, chances of another interest rate cut in December fell after the October FOMC meeting minutes showed on Wednesday that members were divided about how to proceed. This helps offset concerns about the weakening economic downturn led by the longest-ever US government shutdown and favors the USD bulls, validating the positive outlook for the USD/CHF pair.

Meanwhile, the markets reacted little to the recent US-Swiss trade deal amid the recent weak data, showing that Switzerland’s export-oriented economy contracted in the third quarter for the first time in over two years. Apart from this, a fresh wave of the global risk-on trade contributes to the safe-haven Swiss Franc's (CHF) relative underperformance and offers additional support to the USD/CHF pair. However, expectations that the Swiss National Bank (SNB) will keep its policy rate at 0% in December amid forecasts of rising inflation could limit CHF losses.

Furthermore, the USD bulls might opt to wait for the delayed release of the US Nonfarm Payrolls (NFP) report for September before positioning for any further gains. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the USD/CHF pair remains to the upside. Even from a technical perspective, the overnight breakout through the 100-day Simple Moving Average (SMA) backs the case for a further near-term appreciating move.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.