- A combination of factors dragged USD/CHF lower for the third day in a row on Thursday.
- Risk aversion benefited the safe haven CHF and put pressure on amid a weaker dollar.
- Disappointing US macro data did not impress dollar bulls or lend support to the pair.
The pair USD/CHF extended this week’s pullback from the 1.0065 area, or a two-year high, and witnessed aggressive selling for the third day in a row on Thursday. The bearish pressure continued throughout the first North American session and dragged the pair to a two-week low, around the 0.9720-0.9715 area in the last hour.
Investors remain concerned that more aggressive action by major central banks to curb inflation could weigh on global economic growth. Additionally, prolonged COVID-19 lockdowns in China and the war between Russia and Ukraine have fueled recession fears. This, in turn, took its toll on risk sentiment and forced investors to retreat into traditional safe-haven assets, benefiting the Swiss franc and putting downward pressure on the USD/CHF pair.
Risk aversion caused a modest pullback in US Treasury yields. Furthermore, markets appear to have fully priced in a 50 basis point rate hike at the next two FOMC meetings. This, in turn, sparked fresh selling around the US dollar, further contributing to the heavily offered tone surrounding the USD/CHF pair. The dollar maintained its bid tone and was unable to get any respite from the disappointing US macroeconomic releases.
In fact, the Federal Reserve Bank of Philadelphia reported that the general index of manufacturing activity fell to 2.6 in May, compared to 17.6 last month. This figure is well below consensus estimates that pointed to a reading of 16.0. Additionally, weekly initial jobless claims rose to 218,000 for the week ending May 14, up from 200,000 expected and 197,000 previously. Existing Home Sales will also be published on Thursday’s US economic docket.
However, the data may not impress dollar bulls or support the USD/CHF pair. With the latest leg down, spot prices have reversed much of the monthly gains posted in the past two weeks. A trailing sell below 0.9700 will set the stage for a deeper corrective pullback. The bearish traders could then try to test the next major support, just before the key psychological level 0.9500.
Technical levels
Source: Fx Street
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