USD/CHF skates on thin ice near 0.9000, prods two-day rebound amid sluggish markets

• USD/CHF fades recovery from the lowest levels since January 2021.
• US Dollar bulls take a breather after cheering upbeat US data, yields.
• Traders await more clues to extend latest US Dollar rebound.
• China GDP, risk catalysts and second-tier US data can entertain Swiss Franc pair buyers.

USD/CHF struggles to extend a two-day rebound from a multi-month low as it makes rounds to 0.8990-85 during early Tuesday. In doing so, the Swiss Franc (CHF) pair portrays the market’s inaction amid a cautious mood ahead of the key data from China, mainly important because of the latest recession talks.

Even so, the USD/CHF buyers remain hopeful amid the latest recovery in the US Dollar, mainly because of the firmer US Treasury bond yields and the hawkish Fed bets. That said, the US Dollar Index (DXY) stretched Friday’s rebound from a one-year low on Monday as upbeat US data and hawkish Fed talks joined the increasing odds of another Fed rate hike in May, as well as a reduction in the market’s bets suggesting a rate cut in later 2023. The same could be true for the US Treasury bond yields as the US 10-year and two-year bod coupons printed three-day uptrend to 3.60% and 4.20% respectively.

Talking about the data, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading.

On the other hand, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Amid these plays, Wall Street closed positive but failed to challenge the US Dollar bulls amid hopes of further recovery and expectations that the US will be able to overcome the debt ceiling tension, expiring in June.

Moving on, the US Housing Starts and Building Permits for March will be important to watch for intraday directions. More importantly, talks of China’s faster economic recovery will be at the test as the Dragon Nation is up for releasing the first quarter (Q1) Gross Domestic Product (GDP) data and the same will be eyed closely for determining the market sentiment, which in turn affects the USD/CHF pair prices.

Technical analysis

Although the RSI and MACD conditions are in favor of the USD/CHF pair’s further recovery, a three-week-old resistance line and a descending trend line from early March, respectively near 0.9010 and 0.9055, challenge the short-term buyers.