USD/CHF extends Fed-inflicted losses towards 0.9020 support, central banks, US NFP eyed

USD/CHF remains depressed at the lowest levels since August 2021 as bears cheer a three-day downtrend near 0.9065 during Thursday’s Asian session. In doing so, the Swiss Franc (CHF) pair extends the US Federal Reserve-induced losses as market players await the key central bank decision and the US employment report for January.

USD/CHF refreshed a multi-day low the previous day as downbeat US data joined the Fed’s dovish rate hike.

That said, the Fed matched market forecasts of increasing the benchmark rate by 0.25% but the Monetary Policy Statement weighed on the US Dollar while saying that the inflation “has eased somewhat but remains elevated”.

Adding strength to the USD weakness were comments from Fed Chair Jerome Powell as he said “We can declare that a deflationary process has begun.” The policymaker also accepts the need for rate cuts during late 2023 if inflation comes down much faster. Even so, Fed’s Powell suggested that a couple more rate hikes are needed to reach it.

Elsewhere, US ISM Manufacturing PMI dropped to the lowest levels since June 2020 while marking 47.4 figure for January, versus 48.0 expected and 48.4 prior. Further, the ADP Employment Change also declined to a one-year low with 106K the latest figure compared to the 178K market forecasts and the upwardly revised previous figure of 253K. On the contrary, JOLTS Job Openings rose to 11.012M in December, crossing 10.25M consensus and 10.44M prior readings.

Against this backdrop, Wall Street rallied and the US 10-year Treasury yields slumped the most in two weeks. It should be observed that the benchmark yields lick their wounds near 3.41% while the S&P 500 Futures print mild gains by the press time.

Looking forward, USD/CHF traders should pay attention to the market moves affected by the monetary policy meetings of the European Central Bank (ECB) and the Bank of England (BoE). However, major attention should be given to Friday’s US Jobs report. Among them, the headlines Nonfarm Payrolls (NFP), expected to ease to 185K versus 223K prior, will be important to watch.

Technical analysis

A daily closing below the horizontal support zone established since late October 2021, now a resistance line around 0.9085-90, keeps USD/CHF bears directed towards April 2021 bottom surrounding 0.9020.