- USD / CHF is moving lower on Tuesday and is returning some of the strong recovery movement from the previous day.
- A moderate demand for the USD is seen as a key factor weighing on the pair.
- A combination of factors should continue to provide support and help limit any significant drops.
The pair USD/CHF remains under pressure during the European session on Tuesday, moving only a few pips above the daily low around the region 0.9180-75.
The pair had a hard time capitalizing on the previous day’s strong move of nearly 100 pips from the 0.9100 region and moved lower during the first half of trading on Tuesday. A moderate demand for the US dollar it was seen as a key factor acting as a headwind for USD / CHF and attracted some selling near the 0.9200 level. The fall, however, is still endured amid optimistic market sentiment tending to weigh on the safe-haven Swiss franc.
Despite the continued rise in COVID-19 cases globally, investors remain optimistic about signs that the omicron variant could be less severe than feared and it is unlikely to derail the economic recovery. This has been evident in the recent sharp rise in equity markets, which together with optimistic expectations from the Fed acted as a tailwind for US Treasury yields. This combination of factors should lend some support to the USD and limit losses for the USD / CHF pair.
Money markets have fully priced in price a first rate hike in May and two more at the end of 2022. This, in turn, pushed the benchmark 10-year US government bond yield to 1.6420%, or the highest level since November 24, Monday. This should help revive demand for the USD and add credibility to the positive short-term outlook for the USD / CHF pair. That said, investors appear to be reluctant to open aggressive positions ahead of key data this week.
Investors will take cues from major US macro data scheduled at the beginning of a new month. A fairly busy week in terms of important macroeconomic data from the United States begins with the release of the PMI Manufacturing ISM and JOLTs job openings at the start of today’s American session. It is also planned that Fed release minutes of December meeting on Wednesday.
This will be followed by the ADP report and the ISM Services PMI on Thursday. The key focus, however, will remain on the monthly NFP employment report from the United States on Friday.
This will play a key role in influencing short-term USD price dynamics and will provide further directional momentum to the USD / CHF pair. Therefore, it will be wise to wait for a strong continuation buy before confirming that the pair has bottomed out.
USD / CHF technical levels
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