The USD/CHF has seen a positive trend, continuing its recovery in the upper 0.8900s after a busy Thursday that saw a lot of US economic data and renewed speculation about the Fed cutting interest rates. Despite the ISM Manufacturing PMI and jobless claims reports pointing towards a weak job market and industry contraction, the US dollar remained strong, supported by a steady US Dollar Index and investments oriented towards risk ahead of Friday’s nonfarm payrolls report.
For the week ending April 26, jobless claims in the US shot up to 241,000, exceeding the previous week’s number of 223,000 by a considerable margin and surpassing predictions. This surge was the highest recorded since August 2023 and added to the concerns about the cooling of the job market. In addition, the ISM Manufacturing PMI decreased marginally from 49.0 in March to 48.7. The index is still showing contraction, with the components for new orders and production slowing down, while the employment sub-index showed a slight improvement from 44.7 to 46.5. This suggests a gradual reduction in factory payrolls.
The inflation component of the survey, which is measured by the Prices Paid Index, also increased to 69.8, indicating that input costs are still high, keeping inflation risks in sight. The market’s response was balanced, with some risks assets seeing a boost from strong tech earnings. However, the US Treasury curve is still inverted, with the two-year yield remaining below the Fed funds rate, leading to expectations of monetary easing.
On Thursday, Treasury Secretary Scott Bessent reiterated that the yield configuration is a sign that the Federal Reserve should cut rates. As per fed funds futures pricing, the market now expects a reduction of over 100 basis points before the end of 2025. Former Fed Chair Janet Yellen also added pressure by warning that President Trump’s tariff approach could have a negative impact on growth, especially with the ongoing trade tensions with China and stalled negotiations.
In European trade, the Swiss Franc showed weakness as investors remained focused on the US data. The Dollar’s strength was also supported by cautious attitudes as traders awaited Friday’s US jobs report, which will play a crucial role in confirming the recent macro trends and potentially influence the Fed’s next move.
From a technical standpoint, USD/CHF continues to climb after bouncing back from last week’s lows. The pair has crossed the 10-day EMA and is now testing resistance near the 0.9000 level. The short-term momentum favors an upward trend, while the overall trend remains mixed. Support can be seen at 0.8920, followed by 0.8880 and 0.8840. On the upside, resistance is at 0.9000 and 0.9040. A sustained strength above these levels could lead to the March highs near 0.9080.
With the labor market showing signs of weakness and inflation pressures persisting, the Fed’s next moves will be heavily influenced by upcoming data reports. All eyes are now on the April nonfarm payrolls report, which could dictate the next direction for USD/CHF. Until then, the pair may remain rangebound, with a slight bias towards modest gains.