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The USD/CHF pair bounced back on Friday during the North American session, reaching as high as 0.8965 at the time of writing thanks to the US’s better-than-expected Nonfarm Payroll statistics.
The yield on US Treasuries rose as the likelihood of a September Fed cut decreased. Following the announcement of revised Nonfarm Payroll (NFP) data from the US on Friday, which exceeded market expectations, the USD/CHF pair is experiencing a surge. The divergences with the Swiss National Bank (SNB) could support the USD as market bets on the Federal Reserve could become increasingly hawkish.
The corrected reading for April was 165K, but the newly reported NFP for May increased to 272K, exceeding market estimates of 185K. The likelihood that the Fed will cut rates in September has decreased as a result of strong data like this one. Along with a minor decrease in the labour force participation rate—which went from 62.7% to 62.5%—the US unemployment rate increased to 4% from 3.9%. A rise in wage inflation was also indicated by the Average Hourly Earnings, which grew by 4.1% YoY from the revised 4% in April.
The NFP data announcement caused a sharp increase in US Treasury yields, with the 2-year and 10-year rates rising to 4.80%, 4.44%, and 4.41%, respectively, which made the USD more appealing. However, in its March meeting, the SNB started an easing cycle by lowering rates by 25 basis points to 1.5%. The market currently projects a 55% chance that there will be another rate decrease at the June 20 meeting.
Technical Outlook
On the technical level, the pair has recovered to a more advantageous position, moving indicators out of the oversold areas. A more balanced market is indicated by the Relative Strength Index (RSI), which is now hovering around 50, and by the narrower red bars on the Moving Average Convergence Divergence (MACD). The pair is clearly showing signs of recovering positions above the reconstructed 100-day and 200-day SMA barriers, which supports the positive short-term outlook. Moreover, the 200-day SMA provides more support to stave off losses.
