Market Movers: Central Banks, Key Data, and USDCHF in Focus

This week’s high-impact economic events could significantly influence currency markets, including the USDCHF, which has been on an upward trajectory since September. These developments follow the Swiss National Bank’s recent decision to cut its policy rate by 50bps to 0.5%, a move aimed at addressing easing inflation and slowing economic activity. With the Federal Reserve’s upcoming rate decision later today, traders are closely monitoring the USDCHF for potential shifts driven by diverging central bank policies and broader market sentiment.

Wednesday 09:00 am (GMT+2) – UK: CPI y/y (GBP)
Wednesday 21:00 (GMT+2) – USA: Federal Funds Rate (USD)
Wednesday 23:45 (GMT+2) – New Zealand: GDP q/q (NZD)
Thursday Tentative (GMT+2) – Japan: BOJ Policy Rate (JPY)
Thursday 14:00 (GMT+2) – UK: Official Bank Rate (GBP)
Thursday 15:30 (GMT+2) – USA: Unemployment Claims (USD)
Friday 09:00 am (GMT+2) – UK: Retail Sales m/m (GBP)
Friday 15:30 (GMT+2) – Canada: Retail Sales m/m (CAD)
Friday 15:30 (GMT+2) – USA: Core PCE Price Index m/m (USD)

Since bouncing off the lows of 0.83728 in early September, the USDCHF followed an upward trajectory marked by consecutive higher peaks and higher troughs. This uptrend has been intensified by a “Golden Cross,” double crossover where the 20-period Exponential Moving Average (EMA) crossed above the 50-period EMA, signaling strong bullish momentum.

On November 22, the USDCHF exchange rate rose to 0.89562, but the bullish momentum lost steam, leading to a retracement that found support at the dynamic trendline of the 50-period EMA. However, the bulls regained strength, increasing the currency pair to 0.89737 yesterday. A successful breach of this level could pave the way for further price appreciation. Positive readings from momentum indicators support this technical development. The Momentum Oscillator remains above the 100 baseline, and the Relative Strength Index (RSI) is above the critical 50 level, both suggesting sustained bullish pressure.

However, a closer analysis reveals a potential counter-signal. A negative divergence between the price and the Momentum Oscillator indicates a possible pause in the current trend or an impending corrective move. This divergence highlights the importance of closely monitoring price action in the near term.

If buyers maintain control of the market, traders may shift their focus to the following four potential resistance levels:
0.89562: The first price target is seen at 0.89562, mirroring the peak from November 22.
0.90609: The second level of resistance is set at 0.90609, which aligns with the weekly resistance, R2, estimated using the standard Pivot Points methodology.
0.91418: The third price target is seen at 0.91418, mirroring the 261.8% Fibonacci Extension drawn from the swing high, 0.88884, to the swing low, 0.87318.
0.92231: An additional price objective is estimated at 0.92231, representing a weekly high.

If sellers take control of the market, traders may focus on the following four key support levels:
0.88884: The initial support level is determined at 0.88884, representing the swing high from December 2 and the weekly Pivot Point.
0.88032: The second support level is established at 0.88032, aligning with the 50-period Exponential Moving Average and the weekly support, S1, estimated using the standard Pivot Points methodology.
0.87318: The third downside target is determined at 0.87318, corresponding to the trough marked on December 6.
0.86147: An additional downside target is noted at 0.86147, reflecting the daily low from November 5 and the weekly support, S3, calculated using the standard Pivot Points methodology.

The Swiss National Bank (SNB) cut its key policy rate by 50bps to 0.5% on December 12, 2024, exceeding expectations for a 25bps reduction. This marks the fourth consecutive rate cut, the steepest since 2015, amid easing inflation and slowing economic activity. Inflation fell to 0.7% in November, with forecasts remaining within the SNB’s target range through 2026. While GDP growth is projected to improve modestly in 2025, risks from rising unemployment, slower production, and global uncertainties weigh on the outlook.

On the other hand, The Federal Reserve is expected to announce its third consecutive rate cut of 2024 during its December 17-18 meeting, likely reducing the federal funds rate by 0.25 percentage points to a target range of 4.25% to 4.5%. This follows earlier cuts aimed at easing borrowing costs amid moderating inflation, which reached 2.7% in November but remains above the Fed’s 2% target. Economists anticipate a pause in rate reductions in 2025 due to persistent inflation risks and potential impacts from President-elect Donald Trump’s proposed economic policies. While rate cuts provide modest relief for borrowers, mortgage rates remain near 20-year highs, reflecting broader economic uncertainties.

In conclusion, this week’s economic events and market dynamics present critical opportunities for traders, especially in light of the USDCHF’s upward momentum and the SNB’s recent aggressive rate cut. Today’s upcoming decision by the Federal Reserve will be a focal point as markets anticipate a potential 25bps rate cut. Combined with key data releases and central bank decisions, these developments will shape the outlook and highlight potential market shifts, particularly in currency markets like the USDCHF.