USD/CHF remains confined in a multi-week-old range, holds above mid-0.8900s ahead of NFP
- USD/CHF regains some positive traction and reverses a part of the previous day's slide.
- Bets for additional Fed rate hikes act as a tailwind for the USD and lend some support.
- A softer risk tone underpins the CHF and caps the upside ahead of the US NFP report.
The USD/CHF pair attracts some dip-buyers during the Asian session on Friday and reverses a part of the previous day's sharp retracement slide from the vicinity of the 0.9000 psychological mark. Spot prices currently trade around the 0.8960 region, up only 0.10% for the day, and remain confined in a familiar range held over the past three weeks or so.
The prospects for further policy tightening by the Federal Reserve (Fed) help the US Dollar (USD) to stall the overnight pullback from its highest level since June 12, which, in turn, is seen as a key factor acting as a tailwind for the USD/CHF pair. The minutes from the June FOMC meeting released on Wednesday revealed that almost all members supported resuming rate hikes as inflation remains unacceptably high. Adding to this, Thursday's upbeat US ADP report and the ISM Services PMI reaffirmed market bets for a 25 bps lift-off at the upcoming FOMC policy meeting on July 25-26.
This allows the yield on the two-year US government bond, which typically moves in step with interest rate expectations, to stand tall near its highest since June 2007. Moreover, the benchmark 10-year US Treasury yield holds steady above the 4.0% threshold and continues to lend support to the Greenback. Meanwhile, worries over a global economic slowdown, along with the potential risk of a further escalation in the US-China trade conflict, underpins the safe-haven Swiss Franc (CHF). This, in turn, might keep a lid on any meaningful upside for the USD/CHF pair, at least for the time being.
Even from a technical perspective, the recent repeated failures to find acceptance above the 50-day Simple Moving Average (SMA) warrants some caution for bullish traders. Traders might also prefer to wait on the sidelines ahead of the release of the closely-watched US monthly employment details - popularly known NFP report. The crucial jobs data could influence the Fed's rate-hike path and play a key role in driving the USD demand in the near term. Apart from this, the broader risk sentiment might provide some meaningful impetus to the USD/CHF pair on the last day of the week.
Technical levels to watch