USD/CHF slides towards 0.8700 on US Dollar’s positioning for inflation data amid mixed mood

• USD/CHF holds lower grounds near intraday bottom during the first loss-making day in three.
• Markets stabilize on China news after multiple catalysts fanned risk aversion.
• Preparations for Thursday’s US CPI, light calendar could restrict immediate Swiss Franc moves.
• Risk catalysts eyed for clear directions, firmer US inflation backs hawkish Fed concerns and may recall buyers.

USD/CHF remains on the back foot at the intraday low of around 0.8735 amid the early hours of Wednesday’s European session. In doing so, the Swiss Franc (CHF) pair prints the first daily loss in three as the US Dollar reverses from the key upside hurdle due to the market’s positioning for the key inflation data, as well as backed by China news.

US Dollar Index (DXY) retreats from a downward-sloping resistance line from May 31 while printing the first daily loss in three around 102.35, down 0.16% intraday as the market’s previous risk aversion fades.

While portraying the mood, S&P500 Futures recovers from the monthly low marked the previous day and prints mild gains around 4,525 whereas the US 10-year Treasury bond yields remain pressured at the lowest level in a week marked the previous day, around 4.0% by the press time.

It’s worth observing that improvement in China’s Producer Price Index (PPI) for July contrasted with the downbeat Consumer Price Index (CPI) data for the said month to tame pessimism about the world’s biggest industrial players. Also improving the risk appetite is the news from the White House as the Biden Administration signals relief to China technology companies. “The US plans to target only those Chinese companies that get more than 50% of revenue from the sectors including quantum computing and artificial intelligence (AI),” said the news.

On the contrary, Italy’s surprise tax on windfall profits of banks joined the global rating agencies’ downward revision to the US banks and financial institutions to weigh on the risk sentiment the previous day. On the same line could be fears of the UK recession and slowing economic growth in China, not to forget the Dragon Nation’s geopolitical tension with the US and Japan about Taiwan.

Given the market’s preparations for the US CPI for July, up for publishing on Thursday, the USD/CHF may witness further downside. However, strong US inflation numbers and the risk-off mood can push the Swiss Franc pair toward the key technical resistances.

Technical analysis

Despite the latest retreat, the USD/CHF pair remains beyond the 10-DMA support of around 0.8730, which in turn joins upbeat oscillators to suggest the quote’s further upside towards a descending resistance line stretched from November 2022, close to 0.8830 at the latest.