USD/CHF clings to mild losses below 0.8900 as risks dwindle, US inflation eyed

• USD/CHF rebounds from intraday low but stays mildly offered amid pre-data inaction.
• Market sentiment remains fragile amid mixed concerns about US debt ceiling woes.
• Cautious mood ahead of data allows Swiss Franc (CHF) pair to edge lower.
• Positive surprise from US CPI for April can add to US Dollar’s strength.

USD/CHF remains mildly offered despite the latest rebound from the intraday low to 0.8900 heading into Wednesday’s European session. In doing so, the Swiss Franc (CHF) pair bears the burden of the market’s cautious mood ahead of the key US inflation data for April.

Apart from the pre-data anxiety, cautious optimism surrounding the US debt ceiling and bank issues also allow the USD/CHF pair to retreat.

Hopes that the US policymakers can avoid the likely “catastrophic” default, despite the first failed attempt, joins an absence of any fresh banking fallouts, as well as the recently upbeat earnings season, to exert downside pressure on the USD/CHF price, via downbeat US Dollar.

Also, the market’s disbelief in the hawkish Fed talks and recently downbeat US data adds strength to the incentives that lure the USD/CHF bears. On Tuesday, the US NFIB Small Business Optimism index dropped to the lowest level since 2013, to 89 in April. Even so, Federal Reserve Bank of New York President John Williams said, per Reuters, "Fed has not said it's done raising rates."

Elsewhere, a divergence between the Swiss National Bank (SNB) and the Federal Reserve (Fed) monetary policy bias among the policymakers, as well as the market plays, also keep the CHF firmer than the US Dollar.

Amid these plays, the S&P 500 Futures print mild gains while licking the previous day’s wounds whereas the US 10-year Treasury bond yields print the first daily loss in five around 3.51%. On the other hand, the US Dollar Index (DXY) also retreats to 101.50 after rising in the last two consecutive days.

Looking ahead, the US Consumer Price Index (CPI) data for April will be the key for immediate USD/CHF moves amid hawkish talks and easing data, as well as due to the mixed signals from the US Nonfarm Payrolls (NFP). If the data suggest escalating inflation pressure in the world’s biggest economy, the recently hawkish Fed bets may gain acceptance and can allow the US Dollar to pare intraday losses, the first in three.

Technical analysis

A one-month-old falling wedge bullish chart formation restricts short-term USD/CHF moves between 0.8810 and 0.8950.