CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USDCHF Testing Bullish Trend Line after ECI Bombshell

Article By: ,  Financial Analyst
July 31, 2015 3:41 PM

If you have no clue what the “ECI” in the title is, you’re hardly alone.

The Employment Cost Index (ECI) is a quarterly measure of the amount that companies and the government are paying their employees. Usually, this second-tier report barely even garners even a passing mention in the business news, but with the Fed’s recent shift to focusing on inflation as the last missing piece in the rate hike puzzle, some traders have started to pay attention to it.

Unfortunately, the increased attention came at a terrible time for the indicator, which printed at just 0.2% q/q, missing the 0.6% growth that economists had been expecting. Incredibly, this is the lowest quarterly reading in the ECI since records began in 1982! With the annual rate of employment costs rising at just 2.0% annually (and falling), this morning’s report was a definite setback for traders anticipating that the Fed would raise interest rates in September, and the US dollar has predictably turned sharply lower as a result.

Technical View: USDCHF

We’ve been paying particularly close attention to USDCHF of late, as the pair rallied into Bearish Gartley pattern completion last week, prompting a 100-pip drop, before last week’s historically low unemployment claims drove the unit up through that resistance level. Yesterday, the rally stalled out against secondary pattern completion (marked by the 61.8% Fibonacci retracement of XA, the 161.8% extension of BC and the 127.2% ABCD pattern) around .9725. This reversal was accompanied by a clear bearish divergence in the Slow Stochastics indicator, suggesting that underlying buying momentum was waning, even though exchange rate itself edged to a new high.

For USDCHF bulls, today’s shockingly low ECI reading may serve as the proverbial nail in the coffin, at least in the short-term. The pair is now testing 5-week bullish trend line support around .9575, but if that level gives way, a deeper retracement toward .9500 or .9400 could be in play next week. Meanwhile, only a break and close above the top of the resistance zone at .9800 would turn the medium-term bias back to the topside.

Source: City Index

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024