USD/CHF finds cushion around 0.9750, downside remains favored as risk appetite improves

• USD/CHF is oscillating around 0.9750 after a sheer fall and is preparing for further drop ahead.
• A risk-on market profile has sent the DXY into a corrective mode.
• Swiss Real Retail Sales data is seen higher at 3.6% vs. the prior release of 2.4%.

The USD/CHF pair has sensed a sigh of relief after a continuous drop from a high above 0.9950. The asset is trying a develop a base around 0.9750 after a vertical fall, however, the downside seems to favor on cheerful market mood. The major is expected to decline further to near the round-level support of 0.9700 as the market sentiment turned positive after investors found the risk-perceived assets a ‘value bet’.

On Wednesday, the US dollar index (DXY) declined sharply below 113.00 after investors shrugged-off clouds of uncertainty about a further escalation in interest rates by the Federal Reserve (Fed). Investors have started realizing the fact that soaring inflation is attracting policy tightening measures from the Fed. And, the terminal rate is heading towards the optimal figure of 4.6% as discussed in September’s monetary policy meeting.

Atlanta Fed President Raphael Bostic started to cross wires on Wednesday stating that the baseline scenario right now includes a 75 basis points (bps) rate hike in November followed by a 50 bps increase in December, as reported by Reuters. Should that materialize, the pace of hiking interest rates will slow down vigorously.

In today’s session, the spotlight will be on US Gross Domestic Product (GDP) data. As per the consensus, the growth rate in the US economy has declined by 0.6% in the second quarter on an annualized basis. A weaker-than-expected release will weigh more pressure on the DXY.

Meanwhile, the Swiss franc bulls are awaiting the release of the Real Retail Sales data. The economic data is expected to improve by 3.6% vs. the prior improvement of 2.4% on an annual basis. This is going to delight the Swiss National Bank (SNB) to sound hawkish on interest rates in the fourth quarter monetary policy unhesitatingly.