USD/CHF advances towards 0.9600 as risk-averse strengthens DXY, US NFP in focus

• USD/CHF is heading towards 0.9600 as US-China trade tensions have triggered a risk-off impulse.
• The downbeat consensus for US NFP could halt the DXY’s rally.
• A preliminary estimate for the Swiss CPI is 3.5% vs. 3.4% recorded earlier.

The USD/CHF pair is marching swiftly towards the critical barricade of 0.9600 as the US dollar index (DXY) has strengthened on souring market mood. The pair witnessed a firmer reversal on Tuesday after defending Monday’s low around 0.9480 as the risk-aversion theme improved the DXY’s appeal.

Escalating tensions between US and China after US House Speaker Nancy Pelosi visited Taiwan to support their local government against the willingness of China. Death threats to Pelosi on her personal visit to Taiwan are likely to be followed by sanctions on China by the US, which underpinned the negative market sentiment.

Meanwhile, the DXY has printed a three-day high of 106.55, however, the rally could get uncertain ahead of the US Nonfarm Payrolls (NFP), which are due on Friday. As per the market expectations, the US economy has managed 250k job additions in the labor force in July.

Many big tech companies in the US have ditched the recruitment process for a while, whose multiplier effects could be witnessed in the payrolls data. An occurrence of the same will force the Federal Reserve (Fed) to sound a little light on policy rates.

On the Swiss franc front, investors are awaiting the release of the Consumer Price Index (CPI) data. A preliminary estimate for the annual inflation rate is 3.5%, a little higher than the prior release of 3.4%. This will compel the Swiss National Bank (SNB) to elevate interest rates further.