USD/CHF stays defensive above 0.9400 amid sluggish markets in Asia

• USD/CHF struggles for clear directions after snapping two-day uptrend the previous day.
• Light calendar, pre-FOMC blackout restrict immediate moves of the market.
• Mixed concerns surrounding Fed, cautious mood ahead of China data and announcements also test momentum traders.

USD/CHF aptly portrays the market’s indecision as it makes rounds to 0.9420 during Wednesday’s Asian session.

The Swiss Franc (CHF) pair printed the first daily loss in three the previous day while reversing from 0.9456 but the pullback failed to last longer than 0.9380, before printing the last inaction.

A lack of major data and events join no comments from Federal Reserve (Fed) officials ahead of the mid-December Federal Open Market Committee (FOMC) to restrict the market’s immediate moves. Also likely to have challenged the traders could be the mixed signals surrounding Fed and risk appetite.

After the last week’s firmer US employment data and Monday’s strong US ISM Services PMI, the nation’s downbeat trade numbers joined the extended retreat in the inflation expectations to probe the Fed hawks. That said, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, extend the previous retreat from a one-month high by printing the second day of downside. The latest prints of the 5-year and 10-year inflation expectations are 2.38% and 2.43% respectively. It should be noted that the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior.

Additionally, China is up for conveying more easing to its three-year-old Zero-Covid policy on Wednesday, per Reuters, which in turn could trigger the risk-on mood and weigh on the US Dollar. Beijing’s latest move could be linked to the receding virus infections from the record high, as well as multiple announcements suggesting more unlocking of the virus-hit economy that’s the second biggest in the world.

On the contrary, the warnings of grim economic conditions from multiple US banks and downbeat earnings weighed on the market sentiment during late Tuesday. Among them were the United States Heads of Goldman Sachs, Bank of America Corp and JPMorgan Chase. Additionally, Bloomberg Economics also forecasted the lowest economic growth since 1993, to 2.4% for 2023.

Amid these plays, the S&P 500 Futures seesaw near 3,950 whereas the US 10-year Treasury yields cling to 3.54% mark after the previous day’s downbeat performances of Wall Street and the key Treasury bonds.

Looking forward, China trade numbers and the Swiss Unemployment Rate for November may offer immediate directions to the USD/CHF traders. However, major attention will be given to the risk catalysts.

Technical analysis

A convergence of the two-week-old descending trend line and the 21-DMA, around 0.9485, restricts the short-term upside of the USD/CHF price. That said, a three-week-long descending trend line, near 0.9320, restricts the pair’s immediate declines.