USD/CHF slides to multi-day low, below mid-0.9100s amid modest USD weakness

• USD/CHF extends its retracement slide from a multi-month low for the second straight day.
• Sliding US bond yields prompt some follow-through USD profit-taking and exert pressure.
• Hawkish Fed expectations could help limit the USD losses and warrant caution for bears.

The USD/CHF pair drifts lower for the second successive day on Thursday and moves further away from over a six-month top, around the 0.9245 region touched earlier this week. The steady descent drags spot prices to a multi-day low, below mid-0.9100s during the Asian session and is sponsored by a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, extends the overnight pullback from a nearly 11-month top touched on Tuesday and is weighed down by reduced bets for another interest rate hike by the Federal Reserve (Fed) in 2023. The US ADP report released on Wednesday showed that private-sector employers added 89K jobs in September, missing expectations and marking a sizeable drop from August's upwardly revised reading of 180K.

Adding to this, the US ISM Services PMI declined from 54.5 to 53.6 in September, giving the Fed some incentive to stop raising interest rates. This is reinforced by the ongoing retracement slide in the US Treasury bond yields and prompts some follow-through USD profit-taking, which, in turn, is seen exerting some downward pressure on the USD/CHF pair. Investors, however, still seem convinced that the Fed will stick to its hawkish stance and keep interest rates higher for longer.

The hawkish outlook could act as a tailwind for the US bond yields and help limit any meaningful USD corrective decline. This, along with signs of stability in the equity markets, which tends to undermine the safe-haven Swiss Franc (CHF), warrants some caution before placing aggressive bearish bets around the USD/CHF pair. Traders might also prefer to wait on the sidelines ahead of the closely-watched US monthly jobs data – popularly known as the NFP report on Friday.

In the meantime, Thursday's release of the usual Initial Weekly Jobless Claims data from the US, along with the US bond yields and the broader market risk sentiment, will be looked upon for some impetus later during the early North American session. Nevertheless, the fundamental backdrop makes it prudent to wait for strong follow-through selling in order to confirm that the USD/CHF pair has topped out in the near term and positioning for any meaningful depreciating move.

Technical levels to watch