The USD got under some
pressure last Friday following the ugly University of Michigan survey where
consumer sentiment got revised lower and long-term inflation expectations
higher. The market responded by increasing more aggressively the expectations
for more easing from the Fed which triggered some short-term weakness in the
greenback.
That reaction was eventually reversed as we got some positive news on the tariffs front over the weekend that saw the market paring back some of those aggressive rate cuts bets. Unfortunately, there’s still lots of noise around tariffs and it’s hard to trust anything until the official unveiling of the
plan today at 16:00 ET/20:00 GMT.
It’s hard to have conviction on the likely reaction of the greenback to the tariffs announcement. There are good arguments for any scenario really. In case we get positive news, the USD might appreciate in the short term because of the market scaling back the rate cuts expectations, but it could also depreciate because of the risk-on sentiment. On the other hand, bad news might see the greenback falling in the short term because of the market pricing in more rate cuts but also appreciating because of the eventual risk-off sentiment.
There are more straightforward opportunities in other markets in my opinion.
USDCHF 4 hour
From a technical perspective, on the 4 chart above, we can see that the price is now trading near the upper bound of the month-long range. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the support targeting a break below it. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 0.90 handle next.
