USD/CHF retreats from seven-week high towards 0.9750 on mixed Swiss data

• USD/CHF pares intraday gains at 1.5-month high, probes five-day uptrend.
• Swiss Consumer Price Index rose 0.3% MoM, 3.5% YoY in July, Real Retail Sales eased 2.6% YoY in July.
• Risk-off mood, hawkish Fed bets keep DXY on the front foot.
• US ISM Manufacturing PMI, NFP will be crucial for clear directions.

USD/CHF renews intraday low near 0.9765 after a surprise positive Swiss statistics during the early Thursday morning on Thursday. In doing so, the Swiss currency (CHF) pair probes a four-day uptrend near the highest levels since July 15.

Swiss Consumer Price Index (CPI) grew by 0.3% MoM and 3.5% YoY versus 0.2% and 3.4% expected respectively for August. That said, the nation’s Real Retail Sales for July eased below 3.3% expected to 2.6% while crossing the downwardly revised 0.7% prior.

Even so, the risk-off mood and firmer Treasury yields underpin the US dollar. That said, the US Dollar Index (DXY) prints the biggest daily gains in over a week while picking bids near 109.10 at the latest. In doing so, the greenback’s gauge versus the six major currencies appears to ignore the softer US ADP Employment Change that grew by 132K versus 288K expected and 270K prior. The reason could be linked to the average wage increases for August that rose 7.6% y/y and the same kept the Fed policymakers hawkish.

Hawkish Fedspeak could be held responsible for the latest increase in the market’s bets of a 0.75% Fed rate hike in September, which in turn keeps the USD/CHF on a firmer footing. The CME’s FedWatch Tool portrays a 74.0% chance of a 75 basis points Fed rate hike in September, versus 73.0% the previous day.

The grim covid conditions in China and the Sino-American tussles over Taiwan appear to exert more downside pressure on the sentiment, while also favoring the USD/CHF bulls.

Amid these plays, US 10-year Treasury yields refresh a two-month high of around 3.21% while the two-year bond coupons jump to the highest levels since 2007, near 3.20% and 3.50% respectively at the latest. Also portraying the sour sentiment is the S&P 500 Futures’ 0.56% intraday fall to the lowest levels since late July, at 3,930 by the press time.

Given the risk-off mood and firmer US dollar-driven USD/CHF run-up, the pair’s further advances hinge on the US ISM Manufacturing PMI for August, expected 52.8 versus 52.0 prior, ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

The overbought RSI conditions join the upper line of the three-week-long bullish channel, near 0.9820, to challenge the USD/CHF buyers. Alternatively, the pullback moves may initially test the 50% Fibonacci retracement level of 0.9715 before highlighting the 100-DMA support near 0.9680-75.