USD/CHF seesaws around nine-month low as US Dollar bears pause amid sluggish markets

• USD/CHF refreshed multi-day low the previous day amid broad-based US Dollar declines.
• Firmer sentiment, downbeat Treasury bond yields weighed on the greenback.
• Swiss KOF Leading Indicator, US Michigan PMI eyed for fresh impulse.

USD/CHF licks its wounds near 0.9235 after declining to fresh lows since March. That said, the quote’s previous weakness could be linked to the US Dollar weakness, which in turn tracked downbeat US Treasury bond yields. However, the lack of major data/events and the year-end holiday mood seem to restrict the pair’s immediate moves.

On Thursday, US Dollar Index (DXY) refreshed its weekly low to near 103.78 while justifying the first negative daily closing of the US 10-year Treasury yields in the last five days. In doing so, the benchmark bond coupon reversed from a six-week high marked on Wednesday. The downbeat US bond yields also allowed the Wall Street benchmarks to remain positive and exert more downside pressure on the USD/CHF pair.

It’s worth noting that the mixed US data and concerns surrounding China, as well as Ukraine, seemed to have favored the Swiss Franc (CHF) pair’s latest weakness.

US Initial Jobless Claims rose 225K versus 216K prior for the week ended on December 24 while the Continuing Jobless Claims increased by 1.71M from 1.669M previous readout during the week ended on December 16. However, the 4-week moving average for the same dropped to 221K versus the revised down previous readings of 221.25K.

On the other hand, around seven major nations, including the US and the UK have recently announced Covid test requirements for Chinese travelers as the virus cases swirl in the dragon nation but Beijing reverses the “Zero-Covid” policy. Further, China’s Center for Disease Control and Prevention (CDC) top epidemiologist Wu Zunyou warned that Covid is seen spreading throughout the holiday season. Alternatively, Italy’s rejection of fears of any new Covid variant, after finding 50% of flight passengers being infected by the virus, seemed to have helped the markets in ignoring the fears of the virus.  On the same line could be the headlines suggesting China’s discovery of a Covid antiviral pill and hopes of the CDC board to overcome the COVID-19 fears by citing the peak of virus spread in Beijing, Tianjin and Chengdu.

It should be observed that an absence of heavy losses to lives and infrastructures during Thursday’s heavy missile fire on Kyiv and Kharkiv by Moscow joined the global back-up to Ukraine in suggesting a sooner end to the thorny issue.

Moving on, a virtual meeting between China President Xi Jinping and Russian counterpart Vladimir Putin could entertain traders. Additionally, important will be the Swiss KOF Leading Indicator for December, expected 86.9 versus 89.5, as well as the US Chicago Purchasing Managers’ Index for the said month which is likely to improve to 41.2 from 37.2 prior.

Technical analysis

Although the USD/CHF bulls are far from the table unless crossing the 21-DMA hurdle surrounding 0.9320, March 2022 low near 0.9195 could restrict the short-term downside of the Swiss Franc (CHF) pair.