The USD to Swiss franc (USD/CHF) exchange rate tumbled to its lowest swing since March 21st. It has plunged by over 3% from its highest point this year as investors focus on the upcoming US nonfarm payrolls (NFP) data.
US NFP data ahead
The USD/CHF pair crashed hard after the mixed US manufacturing PMI numbers. Data by the Institute of Supply Management (ISM) showed that the country’s manufacturing PMI crashed from 49.2 in April to 48.7 in May, lower than the median estimate of 49.8.
The ISM manufacturing prices dropped from 60.9 in April to 57.0 in May. A PMI figure less than 50 is usually a sign that a sector is contracting.
Meanwhile, another report by S&P Global revealed that the manufacturing PMI rose from 50.0 to 51.3, higher than the expected 50.9.
Looking ahead, the USD/CHF pair will react to several important US and Swiss economic numbers. Switzerland will publish the latest inflation numbers. Economists polled by Reuters expect the data to show that the headline CPI dropped to 0.4% in May (MoM) and 1.3% YoY). A lower inflation report will raise the possibility that the Swiss National Bank will continue cutting interest rates.
The US Labor Department will publish the latest factory orders and JOLTs job openings report on Tuesday. Economists expect the data to show that the number of job openings dropped from over 8.48 million to 8.4 million.
ADP will publish its private payrolls data on Wednesday. The median estimate is that the economy added 175k jobs in May after creating over 192k in the previous month. These numbers will come ahead of the official NFP data.
All these reports will provide more information about what to expect from the Federal Reserve. The base case is that the bank will start cutting rates in the fourth-quarter, especially after the general election.
USD/CHF technical analysis
The USD to CHF exchange rate peaked at 0.9225 in May, a few pips below 0.9245, its highest swing in October last year. It formed an evening star pattern and has moved below the 50-day moving average.
The pair has slumped below the key support at 0.900, its lowest swing on May 16th. Most importantly, it has found support at the 200-day moving average. It has also formed a head and shoulders pattern.
Therefore, the pair will likely continue falling as sellers target the key support at 0.8900. The stop-loss of this trade is at 0.900.
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