USD/CHF rebounds from two-month low towards 0.9600 ahead of US PCE inflation

• USD/CHF picks up bids to refresh daily tops, extends bounce off the multi-day bottom marked the previous day.
• US dollar pares intraday losses as Treasury yields reverse early Asian session gains.
• Downbeat Swiss Real Retail Sales appears to have played their role ahead of Fed’s preferred inflation data.

USD/CHF takes the bids to refresh intrday high near 0.9560, extending the previous day's rebound from the lowest levels since April, as the US dollar pullback jostles with the risk-off mood during early Thursday in Europe.

In doing so, the Swiss currency (CHF) pair also justifies the recently released Swiss Real Retail Sales, -1.6% versus 3.8% expected and upwardly revised -5.5% prior.

The US Dollar Index (DXY) regains 105.00 while extending the two-day rebound near the highest levels in a fortnight. The greenback’s recent strength appears connected to the US 10-year Treasury yields as the key bond coupons refresh the weekly low to 3.07%, down by 2.2 basis points (bp) by the press time.

It’s worth noting that the risk-off mood, as portrayed by more than 1.0% intraday loss of the US and the European stock futures, also underpin the US dollar buying.

The reason could not be linked to the market’s consolidation of the weekly gains ahead of the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, as well as the quarter-end positioning. The inflation precursor is expected to rise to 0.4% MoM in May versus 0.3% prior.

The US data could propel the Fed towards aggressive rate hikes and can renew USD/CHF buying as Fed Chairman Jerome Powell repeated his pledge to battle inflation with readiness to announce another 0.75% rate hike, if needed, during Wednesday’s ECB Forum. The Fed Boss also praised the US economic strength and helped the US dollar to remain firmer. It’s worth noting that Powell’s comments suggesting challenges for US jobs data during the battle with inflation, as well as Deutsche Bank’s fears of no respite to inflation woes, appear to have weighed on the risk profile of late.

Given the CHF’s safe-haven status, the pair’s reaction to the risk-off mood appears mixed. Also favoring the USD/CHF bears is the Swiss National Bank’s (SNB) comparatively more hawkish bias than the Fed.

Technical analysis

Despite bouncing off the 100-DMA, around 0.9520 at the latest, USD/CHF remains below a two-week-old resistance line near 0.9610, which in turn keeps sellers hopeful. Even if the pair manages to cross the 0.9610 hurdle, the support-turned-resistance trend line from late March, around 0.9710, appears a tough nut to crack for the pair buyers.