USD/CHF pares the biggest daily loss in five weeks around 0.8800, focus on mid-tier Swiss/US data

• USD/CHF struggles to defend recovery from weekly low, prints the first daily gain in three.
• Market consolidates amid cautious mood before Swiss sentiment numbers, US employment, inflation cues.
• Downbeat US data bolsters expectations favoring end of Fed rate hikes but confirmations awaited.

USD/CHF clings to mild gains around 0.8790 as it consolidates the biggest daily loss since late July, marked the previous day, amid the early hours of Wednesday’s European session.

It’s worth noting that the US Dollar’s positioning for top-tier data and the market’s reassessment of the previous dovish bias about the Federal Reserve (Fed) allowed the Swiss Franc (CHF) pair to print the first daily gains in three.

That said, the US Dollar Index (DXY) clings to mild gains after the previous day’s US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias. The same drowned the Greenback and the US Treasury bond yields.

Elsewhere, the mixed concerns about the US-China ties and indecision about the softer landing also fuel the USD/CHF rebound. China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Amid these plays, the US S&P 500 Futures print mild gains and prod the riskier assets, which in turn propel the USD/CHF prices. That said, the US 10-year Treasury bond yields seesaw around 4.15% after refreshing the weekly low the previous day.

Looking ahead, US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) data will be closely observed to confirm the Fed’s policy pivot concerns. Should the scheduled data confirm the need for exiting the restrictive monetary policies, the USD/CHF may witness further downside.

Technical analysis

A three-month-old previous support line puts a floor under the USD/CHF prices near 0.8765, which in turn joins upbeat oscillators to suggest the pair’s recovery towards the 100-DMA resistance of around 0.8885.