USD/CHF picks up from 0.9920 approaches parity again

• The dollar bounces up at 0.9920 to trim Monday's losses.
• The ongoing risk-on mood is keeping a lid on USD bulls.
• USD/CHF: A break of 0.9876 support will increase downside pressure – Credit Suisse.

The US dollar edged up on Tuesday to pare losses after Monday’s sharp decline. USD/CHF has bounced up from the one-week low at 0.9920 to reach a session high at 0.9975.

The greenback appreciates as US bonds tick up

The uptick in US bond yields seen on Tuesday has provided a fresh boost for the USD to trim previous losses in spite of the positive market sentiment. The risk-on mood seen on Monday, after the historical U-turn on the British Government's mini-Budget plan, seems to have extended into Tuesday.

World stocks have traded higher for the second consecutive day, with the Dow Jones, the S&P, and the Nasdaq, all three appreciating posting advances of about 1% at the time of writing. This positive market mood is keeping a lid on dollar bulls.

On the macroeconomic front, the German ZEW Survey has reflected a larger-than-expected deterioration in the current economic conditions. The report has also revealed higher chances of a decline in the GDP over the next six months, yet without a remarkable impact on the risk-on market mood.

The US dollar has been favoured by a brighter-than-expected performance of the US industrial sector in September. US Industrial Production accelerated at a 0.4% pace, beating expectations of a 0.1% improvement, while the capacity utilization reached 80.3% against market consensus of a mild decline to 80%.

USD/CHF: Breach of 0.9876 will increase downward pressure  – Credit Suisse

On the downside, FX analysts at Credit Suisse point out to a key support area at 0.9876: “USD/CHF’s surge was capped at the major resistance at the trendline from 2016 at 1.0075. This strong reversal lower paired with daily RSI holding a bearish divergence continues to strengthen the case for a near-term weakness (…) “Immediate support is seen at the recent low and the 13-day exponential average at 0.9929/13, though only a close below 0.9876 would raise more serious thoughts of the near-term risk shifting lower again.” 

Technical levels to watch