USD/CHF forms bullish engulfing after strong US NFP data

The USD/CHF exchange rate popped after the strong US non-farm payrolls (NFP) data. It formed a bullish engulfing pattern and reached a high of 0.8670 as the need for immediate rate cuts by the Federal Reserve.

The USD to CHF pair reacted mildly to the latest US jobs numbers. According to the BLS, the economy created over 325k jobs in January, a bigger increase than most analysts expected. The unemployment rate remained at 3.7% while wage growth accelerated.

These numbers mean the Federal Reserve has successfully engineered a soft landing for the economy. Besides, the Atlanta Fed Now tool indicates that the economy is still growing. It sees it growing by over 4% in the first quarter after expanding by 3.3% in Q4.

As such, while the Fed is set to start cutting rates later this year, there are concerns about whether these cuts are necessary in the first place. This explains why the Fed ruled out against rate cuts coming as soon as in March.

Looking ahead, the USD/CHF will have several important catalysts this week. The most important one will be statements by Fed officials like Jerome Powell, Raphael Bostic, Loretta Mester, Michele Bowman, and Thomas Barkin.

There will be no major economic data from Switzerland. The only one will be the upcoming Swiss unemployment rate. In most cases, this figure has no major implication on the CHF because the country is used to a low jobless rate.

The daily chart shows that the USD to CHF pair pulled back last week as traders reflected on the latest Fed decision. It then went up sharply, forming a bullish flag pattern. In most cases, this pattern is one of the most bullish signs in the market. It is characterised by a big bullish candle that fully covers a previous red one.

The pair has also moved slightly above the 50-day moving average. Therefore, because of the bullish engulfing pattern, there is a likelihood that the pair will continue soaring in the coming days as hopes of a Fed rate cut fade.

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