It has been an active week on the forex, with the USD gaining ground versus the majors. Rallies against the Canadian dollar, Euro, and Swiss franc have highlighted the action. On Wednesday, the USD/CHF broke above .9725 and put in a hard test of multiple daily topside resistance levels. Since then, the action has slowed and the Swissy has entered consolidation.

However, the quiet conditions are not likely to last. Friday brings the first U.S. Non-Farm Payrolls (Dec.) report of 2020. Payrolls are expected to drop to 164,000 from 266,000. Although this is a bearish estimate, today’s secondary employment figures show that the labor market may be softening a bit:

Event                                                               Actual      Projected     Previous

Continuing Jobless Claims (Dec. 27)          1.803M         1.720M          1.728M

Initial Jobless Claims (Jan. 3)                        214K               220K             223K

In short, this morning’s figures aren’t overly strong. Continuing Jobless Claims are up, while Initial Jobless Claims are modestly down. Many expected these figures to be extremely positive due to a rise in holiday seasonal employment. This idea turned out to be false and the stage is now set for a downturn in U.S. NFP (Dec.).

Let’s dig into the USD/CHF technicals and see if there is a trading opportunity on the horizon.

USD/CHF: Daily Technical Outlook

Since the three-day plunge of late 2019, the Swissy has traded largely sideways. The result has been a pronounced “L” formation on the daily chart, indicating market compression. Even though Wednesday’s bull run threatened to extend further, rates failed beneath .9750. Now, the USD/CHF is back in consolidation near .9725.

Here are the key levels to watch in this market:

• Resistance(1): Daily SMA, .9742
• Resistance(2): 62% Current Wave, .9760
• Resistance(3): Bollinger MP, .9789

Bottom Line: If we see the USD/CHF grind higher on tomorrow’s U.S. NFP release at 8:30 AM EST, a short trade may come into play. Until Friday’s closing bell, I will have sell orders queued up from .9754. With an initial stop at .9777, this trade produces 20 pips on a slightly sub-1:1 risk vs reward management plan.