USD/CHF retreats below 0.8850 ahead of key US data

• USD/CHF trades at 0.8840, tallying losses for a second consecutive day.
• Investors are still digesting Powell’s words on Friday. Meanwhile, the USD consolidates gains.
• The focus shifts to labour market reports from the US.

At the start of the week, the USD traded soft against most of its rivals, and the DXY index consolidated the 0.80% gains seen on Thursday and Friday. Nonfarm payrolls and economic activity figures will be the week’s highlight for the US, and on the CHF’s side, investors await Retail Sales and Inflation figures from July and August.

After the Chairman of the Federal Reserve (Fed) Jerome Powell stated on Friday that the bank would maintain rates at restrictive levels until the economy shows signs of cooling, he also left the door open for another hike. He pointed out that the bank will proceed “carefully” in the next decisions. Following his words, the US bond yields rose, signifying that the markets placed bets on a more hawkish Fed. 

 In that sense, World Interest Rates Probabilities (WIRP) suggests that markets discount low odds of a hike in September, but the odds of a 25 basis point (bps) increase in November rose to nearly 70%. Focus now shifts to key labour market figures, including JOLT job Opening, ADP Employment Change, and August’s Nonfarm Payroll report, as a tighter labour market would give the Fed the green light to continue tightening.

 USD/CHF Levels to watch 

 Analysing the daily chart, a neutral to bearish technical outlook is evident for USD/CHF, suggesting that the bears are gaining momentum but still do not have an upperhand over the bulls for the short term. The Relative Strength Index (RSI) has a negative slope above its midline, while the Moving Average Convergence (MACD) prints stagnant green bars. On the other hand, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day indicating that there is still some light for the bulls and that the bears have still more ground to cover

 Support levels: 0.8830, 0.8800, 0.8780 (20-day SMA).

 Resistance levels: 0.8890 (100-day SMA), 0.8915, 0.8950.

 USD/CHF Daily Chart