GBP/USD, USD/CAD and USD/CHF Analysis
- Hawkish Powell sends markets higher, NFP and average hourly earnings up next
- GBP/USD plummets below a number of key levels in latest decline
- USD/CAD bullish breakout gains momentum
- USD/CHF finding resistance as markets weigh 50 or 75 Bps from SNB
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
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Hawkish Powell Sends Markets Higher, NFP up Next
Fed Chairman Jerome Powell gave testimony in front of the Senate Banking Committee yesterday and opened the door to a faster pace of rate hikes which sent the treasury yields and the dollar considerably higher. Powell mentioned that there are two or three crucial pieces of inflation data before the FOMC meeting on the 22nd of March, with average hourly earnings due alongside the NFP print this Friday.
Therefore, the recent leg higher for the dollar could find further validation via a hotter earnings print or experience some resistance to a bullish continuation should we see a sizeable move lower. Now that the Fed appears to have shifted into an even more aggressive trajectory, it would take a lot within the data to warrant any back tracking from here and so the bar remains rather high.
GBP/USD Plummets Below a Number of Key Levels in Latest Decline
On the more bullish side of USD, cable appears one to watch going forward. Despite easing fundamental data within the UK (GDP, PMIs) the outlook for the UK ahead of next week’s Spring Statement remains glum. GBP/USD has struggled to gain and maintain any ground against the dollar and yesterday’s move suggests a bearish continuation may be on the cards.
GBP/USD traded through not only the psychological 1200 level but also the 23.6% Fibonacci retracement of the 2022 move and thus far, is holding below the Jan swing low of 1.1840. With few signs of a pullback, cable appears vulnerable to more selling but today’s close will be telling. Support appears at the 2016 low of 1.1685, followed closely by the 38.2% retracement at 1.1640. Immediate resistance appears at 1.1840, followed by 1.1949 and 1.2000.
GBP/USD Daily Chart
Source: TradingView, prepared by Richard Snow
USD/CAD Bullish Breakout Gains Momentum
The Canadian dollar has struggled for any prolonged impetus as WTI oil prices continue to range at relatively reduced levels at a time when the Bank of Canada is essentially on pause. The Bank of Canada is due to release the statement of its latest meeting later today where it is almost nailed on that there will be no change in the policy rate. With this being the case, USD/CAD appears to favor a more bullish posture but current levels appear overbought. The weekly chart below reveals the broad strength of the bullish USD/CAD multi-month trend.
USD/CAD Weekly Chart
Source: TradingView, prepared by Richard Snow
The risk of a pullback directs attention to the 1.3775 level of resistance around an area of prior highs at the end of Q3 and the start of Q4 last year. The 2022 yearly high of 1.3980 remains the next level of resistance. Support appears at the 61.8% Fib retracement of the major 2020 to 2021 decline.
USD/CAD Daily Chart
Source: TradingView, prepared by Richard Snow
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USD/CHF Finding Resistance as Markets Weigh 50 or 75 Bps From SNB
On the bearish side of USD, the USD/CHF pair is certainly of interest around current levels. While the fundamentals certainly suggest one way traffic, in the event we do see a softer dollar in the days/weeks to come, such price action may play out in USD/CAD.
The longer-term downward trend in USD/CHF remains despite the recent meg higher. It is within this backdrop of a largely bearish picture, that any dollar weakness is likely to show up. In addition, at current levels and prices nearer to the 38.2% Fib retracement of the massive 2022 to 2023 decline at 0.9475. The Swiss National Bank will meet towards the end of the month to communicate whether a 50 bps or 75 bps hike is most appropriate considering the Bank meets more infrequently than others. A 75 bps hike could hamper dollar strength, if the USD trend is to continue.
Resistance appears at 0.9475 but the appearance of extended higher wicks at levels beneath that suggest there may be a fair amount of resistance before then. Support lies at the 23.6% Fib retracement at 0.9317
USD/CHF Daily Chart
Source: TradingView, prepared by Richard Snow
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
