“¢ Resurgent US bond yields underpin USD demand and helped gain positive traction.
“¢ Fading safe-haven demand seen weighing on CHF and provided an additional boost.
The USD/CHF pair finally broke out of its overnight consolidative trading range and surged through the 0.9700 handle to hit multi-day tops in the last hour.
After yesterday’s directionless move, the pair caught some strong bids on Tuesday and was being supported by resurgent US Dollar demand. A goodish pickup in the US Treasury bond yields underpinned the greenback demand and was seen as one of the key factors driving the pair higher.
Adding to this, a slight improvement in investors’ appetite for riskier assets, as depicted by some signs of stability in equity markets, dented the Swiss Franc’s safe-haven appeal and further collaborated to the pair’s strong up-move.
Meanwhile, the release of latest Swiss consumer inflation figures, coming in to show a flat m/m reading for August, did little to influence the price-action, with the USD dynamics acting as an exclusive driver of the pair’s momentum through the early European session.
The latest leg of a sudden spike of around 25-30 pips over the past hour or so could also be attributed to some technical buying, following a decisive move beyond the 0.9700 handle. Hence, a follow-through up-move, led by some additional short-covering, now looks a distinct possibility.
Later during the early North-American session, the release of US ISM manufacturing PMI will now be looked upon to grab some short-term trading opportunities.
Technical levels to watch
Any subsequent up-move is likely to confront resistance near mid-0.9700s (200-day SMA), above which the momentum could further get extended towards the 0.9790-0.9800 supply zone. On the flip side, the 0.9700 handle now seems to protect the immediate downside, which if broken might turn the pair vulnerable to head back towards retesting 4-1/2 month lows, around mid-0.9600s.
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