USD/CHF bulls flirt with 1.0000 as DXY rebounds, US PMIs, GDP eyed

• USD/CHF picks up bids to reverse Friday’s pullback from three-year top.
• Challenges to sentiment, consolidation of previous sharp moves recall buyers.
• The first readings of US PMIs for October, Q3 GDP will be important for clear directions.
• Fed’s silence might challenge the buyers, especially after the recently mixed comments.

USD/CHF pares Friday’s losses around 1.0010 as the US dollar sellers step back during early Monday in Asia.

While the market’s rebalancing of the previous expectations appears to play a major role in the USD/CHF pair’s latest rebound, fresh challenges to the risk appetite, mainly from China and North/South Korea also propel the quote of late.

News that Both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, seemed to have triggered the US dollar’s latest recovery. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row.

On Friday, the US Dollar Index (DXY) marked heavy losses while amplifying the first weekly negative in three as the hawkish Fed bets retreat after mixed Fedspeak. That said, St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they will need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ) wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a smaller increase in December.

It should be noted that the US equities posted the largest weekly gains in four months while the US 10-year Treasury yield marked a 5% weekly gain while refreshing a 14-year high, despite posting mild losses on Friday. Also, the CME’s FedWatch Tool suggested a nearly 88% chance of the Fed’s 75 bps rate hike in November, after posting nearly 95% odds for the outcome earlier in the week.

Moving on, the Fed policymakers’ two-week silence ahead of November’s Federal Open Market Committee (FOMC) meeting may restrict USD/CHF moves. However, the preliminary readings for the US PMIs for October and the first readings of the US Gross Domestic Product for the third quarter (Q3), up for publishing on Monday and Thursday respectively, could entertain the pair traders. That said, the bulls may witness easy days ahead considering the likely mixed statistics and the recent risk-negatives.

Technical analysis

Despite the latest rebound, a daily closing beyond the previous support line from September 13, around 1.0010 by the press time, appears necessary to recall the USD/CHF buyers.