Will the service sector prove its resilience again? The USD/CHF exchange rate awaits the answer.
2025-09-04 21:57:04
At 10:00 PM on Thursday (September 4th), the market will see the release of the U.S. Institute for Supply Management (ISM) Services PMI for August. This catalyst has caused the USD/CHF pair to fluctuate and strengthen on the four-hour chart. The latest candlestick chart is trading above the middle Bollinger Band at 0.8028 and approaching the upper Bollinger Band at 0.8072. During the North American session, it stabilized around 0.8050, suggesting a period of technical consolidation before the data release.
The resilience of the US services sector remains the central narrative of the macroeconomic outlook this year. Market consensus predicts a slight rise to 51 in the August ISM Services PMI from 50.1 in July. If realized, this would mark the third consecutive month above the boom-bust line, continuing the trajectory of moderate expansion. However, it's important to note that July's sub-indexes weren't entirely positive: the employment sub-index fell to 46.4, returning to contractionary territory; new orders slipped to 50.3, weakening marginal momentum; and the prices paid sub-index rose to 69.9, indicating continued price stickiness in the services sector, which reinforces the recent persistence of high inflation.
Regarding inflation, the July Personal Consumption Expenditures (PCE) report released intriguing signals: core PCE, excluding food and energy, rose 2.9% year-on-year, up from 2.8% in June and slightly above previous forecasts. Headline PCE growth remained at 2.6% year-on-year, showing no further easing. Against this backdrop, policymakers remain cautious about returning inflation to the 2% target, especially as the lagged impact of recent tariff changes has yet to fully transmit. In other words, even if the PMI falls around 51 as expected, the directional impact on the US dollar is likely to be limited, more likely reaffirming the economic narrative of "resilience but not scorching heat."
The employment thermometer also showed a mild reading. ADP data showed that US private sector payrolls increased by 54,000 in August, below market expectations of 65,000 and a significant decline from the revised 106,000 in July. Meanwhile, annualized wage growth was 4.4%. ADP Chief Economist Nela Richardson noted that strong hiring at the beginning of the year has faltered amidst uncertainty, and the slowdown in hiring may be due to factors such as labor shortages, cautious consumption, and AI disruptions. In contrast to the weak ISM employment component, employment expansion in the service sector is showing signs of slowing down.
Regarding high-frequency labor market indicators, initial jobless claims rose to 237,000 in the week ending August 30th, exceeding expectations of 230,000 and the previous reading of 229,000. The four-week moving average rose by 2.5K to 231,000. Continuing claims fell to 1.940M in the week ending August 23rd, corresponding to a seasonally adjusted unemployment rate of 1.3%. This mixed bag of signals suggests that while the job market hasn't stalled, signs of a marginal cooling are accumulating—which typically dampens the "accelerator" of the service sector, but could also slow inflation's "inertia."
Externally, inflationary pressures in Switzerland remain subdued. August's CPI rose by 0.2% year-on-year and -0.1% month-on-month, both in line with expectations, highlighting that inflation remains subdued. The continued weakening of the price environment has kept the Swiss National Bank (SNB)'s policy stance relatively accommodative, even after lowering its policy rate to zero in June. If domestic demand weakens further, market pricing for a more dovish stance from the SNB may solidify. For the foreign exchange market, this combination of weak inflation and a relatively accommodative stance will weaken the Swiss franc's interest rate differentials in the absence of a risk-on shock, providing a tailwind for USD/CHF.
In summary, the current macroeconomic framework is characterized by a tug-of-war between resilient US growth and sticky inflation and a cooling employment margin, limiting the dollar's directional momentum. Meanwhile, Switzerland's low inflation and easing bias are depressing the CHF's inherent support. These two factors are counteracting each other, leading to a narrow, technically driven exchange rate range ahead of the data release. Event-driven factors are more likely to come from the "structural surprises" of the ISM sub-items.
Looking at the four-hour chart, the middle Bollinger Band is at 0.8028, with the upper band at 0.8072 and the lower band at 0.7984. The band has recently widened slightly after converging, indicating a mild recovery in volatility. The price is currently holding above the middle band and converging towards the upper band, forming a tug-of-war zone between above the middle band and below the upper band. Key price levels to watch: 0.8060, 0.8067 (the most recent top marker), and 0.8072 (the upper Bollinger Band); further up, the previous high of 0.8103 is indicated. Support below is initially seen at 0.8028 (the middle Bollinger Band), followed by the "congested zone" formed by the two recent lows of 0.7993 and 0.7985 and 0.7984 (the lower Bollinger Band).
In terms of momentum indicators, MACD shows DIFF of about 0.0007, DEA of about 0.0005, and histogram of about 0.0003, which are in the slightly positive range - the golden cross continues but the strength is average, and the momentum has not formed a unilateral expansion; if the subsequent column cannot continue to expand, the price will fluctuate around the 0.8067-0.8072 range; on the contrary, once the column lengthens again and is accompanied by the K-line entity rising, the Bollinger upper rail "moves up with the trend", which will increase the probability of an effective breakthrough of the 0.8072 line. The relative strength index RSI (14) recorded about 57.6612, which is in a relatively strong but far from overheated area, which is conducive to "lifting oscillation along the upper rail-middle rail". Comprehensive structure and rhythm, this cycle is more like a "secondary consolidation" after the upward movement of the double bottom band from 0.7985 to 0.7993. The price retracement to the middle rail is effective, the moving average turns upward, and the short-term trend is moderately upward without breaking away from the box.
From this, a "technology map" can be constructed:
(1) Resistance band: 0.8060 → 0.8067 → 0.8072 → 0.8103, showing the order of “proximal end – structure – channel – extreme value”;
(2) Support band: 0.8028 → 0.7993/0.7985 → 0.7984, corresponding to “dynamic middle rail – double bottom band – lower rail threshold” respectively.
If the price is frequently blocked between 0.8067 and 0.8072 and the MACD histogram weakens, be alert for a pullback to the middle track of 0.8028; if it effectively recovers and stabilizes at 0.8072, and the RSI rises and approaches the 60-65 range, it will hit the near-term high of 0.8103 for confirmation.
Fundamentals
The resilience of the US services sector remains the central narrative of the macroeconomic outlook this year. Market consensus predicts a slight rise to 51 in the August ISM Services PMI from 50.1 in July. If realized, this would mark the third consecutive month above the boom-bust line, continuing the trajectory of moderate expansion. However, it's important to note that July's sub-indexes weren't entirely positive: the employment sub-index fell to 46.4, returning to contractionary territory; new orders slipped to 50.3, weakening marginal momentum; and the prices paid sub-index rose to 69.9, indicating continued price stickiness in the services sector, which reinforces the recent persistence of high inflation.
Regarding inflation, the July Personal Consumption Expenditures (PCE) report released intriguing signals: core PCE, excluding food and energy, rose 2.9% year-on-year, up from 2.8% in June and slightly above previous forecasts. Headline PCE growth remained at 2.6% year-on-year, showing no further easing. Against this backdrop, policymakers remain cautious about returning inflation to the 2% target, especially as the lagged impact of recent tariff changes has yet to fully transmit. In other words, even if the PMI falls around 51 as expected, the directional impact on the US dollar is likely to be limited, more likely reaffirming the economic narrative of "resilience but not scorching heat."
The employment thermometer also showed a mild reading. ADP data showed that US private sector payrolls increased by 54,000 in August, below market expectations of 65,000 and a significant decline from the revised 106,000 in July. Meanwhile, annualized wage growth was 4.4%. ADP Chief Economist Nela Richardson noted that strong hiring at the beginning of the year has faltered amidst uncertainty, and the slowdown in hiring may be due to factors such as labor shortages, cautious consumption, and AI disruptions. In contrast to the weak ISM employment component, employment expansion in the service sector is showing signs of slowing down.
Regarding high-frequency labor market indicators, initial jobless claims rose to 237,000 in the week ending August 30th, exceeding expectations of 230,000 and the previous reading of 229,000. The four-week moving average rose by 2.5K to 231,000. Continuing claims fell to 1.940M in the week ending August 23rd, corresponding to a seasonally adjusted unemployment rate of 1.3%. This mixed bag of signals suggests that while the job market hasn't stalled, signs of a marginal cooling are accumulating—which typically dampens the "accelerator" of the service sector, but could also slow inflation's "inertia."
Externally, inflationary pressures in Switzerland remain subdued. August's CPI rose by 0.2% year-on-year and -0.1% month-on-month, both in line with expectations, highlighting that inflation remains subdued. The continued weakening of the price environment has kept the Swiss National Bank (SNB)'s policy stance relatively accommodative, even after lowering its policy rate to zero in June. If domestic demand weakens further, market pricing for a more dovish stance from the SNB may solidify. For the foreign exchange market, this combination of weak inflation and a relatively accommodative stance will weaken the Swiss franc's interest rate differentials in the absence of a risk-on shock, providing a tailwind for USD/CHF.
In summary, the current macroeconomic framework is characterized by a tug-of-war between resilient US growth and sticky inflation and a cooling employment margin, limiting the dollar's directional momentum. Meanwhile, Switzerland's low inflation and easing bias are depressing the CHF's inherent support. These two factors are counteracting each other, leading to a narrow, technically driven exchange rate range ahead of the data release. Event-driven factors are more likely to come from the "structural surprises" of the ISM sub-items.
Technical aspects:
Looking at the four-hour chart, the middle Bollinger Band is at 0.8028, with the upper band at 0.8072 and the lower band at 0.7984. The band has recently widened slightly after converging, indicating a mild recovery in volatility. The price is currently holding above the middle band and converging towards the upper band, forming a tug-of-war zone between above the middle band and below the upper band. Key price levels to watch: 0.8060, 0.8067 (the most recent top marker), and 0.8072 (the upper Bollinger Band); further up, the previous high of 0.8103 is indicated. Support below is initially seen at 0.8028 (the middle Bollinger Band), followed by the "congested zone" formed by the two recent lows of 0.7993 and 0.7985 and 0.7984 (the lower Bollinger Band).
In terms of momentum indicators, MACD shows DIFF of about 0.0007, DEA of about 0.0005, and histogram of about 0.0003, which are in the slightly positive range - the golden cross continues but the strength is average, and the momentum has not formed a unilateral expansion; if the subsequent column cannot continue to expand, the price will fluctuate around the 0.8067-0.8072 range; on the contrary, once the column lengthens again and is accompanied by the K-line entity rising, the Bollinger upper rail "moves up with the trend", which will increase the probability of an effective breakthrough of the 0.8072 line. The relative strength index RSI (14) recorded about 57.6612, which is in a relatively strong but far from overheated area, which is conducive to "lifting oscillation along the upper rail-middle rail". Comprehensive structure and rhythm, this cycle is more like a "secondary consolidation" after the upward movement of the double bottom band from 0.7985 to 0.7993. The price retracement to the middle rail is effective, the moving average turns upward, and the short-term trend is moderately upward without breaking away from the box.
From this, a "technology map" can be constructed:
(1) Resistance band: 0.8060 → 0.8067 → 0.8072 → 0.8103, showing the order of “proximal end – structure – channel – extreme value”;
(2) Support band: 0.8028 → 0.7993/0.7985 → 0.7984, corresponding to “dynamic middle rail – double bottom band – lower rail threshold” respectively.
If the price is frequently blocked between 0.8067 and 0.8072 and the MACD histogram weakens, be alert for a pullback to the middle track of 0.8028; if it effectively recovers and stabilizes at 0.8072, and the RSI rises and approaches the 60-65 range, it will hit the near-term high of 0.8103 for confirmation.
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