USD/CHF advances to fresh 5-day high as USD gathers strength

• European currencies struggle to find interest as Italian political drama continues.
• USD bulls take advantage of the thin market volume to lift the DXY to a fresh 2018 high.
• The pair is likely to, once again, target the critical parity level.

The USD/CHF pair, which closed the previous week near the 0.99 mark, moved in a tight 20-pip range before gaining traction in the last hour to renew its highest level since May 23 at 0.9955. At the moment, the pair is trading a couple of pips below that recent peak and adding 0.5% on a daily basis.

This recent upsurge seems to be a product of a strengthening greenback. After starting the week with a bearish gap below the 94 handle, it didn’t take long for the US Dollar Index to find  enough demand to build on last week’s gains. Following the break above 94, the DXY advanced to a fresh 2018 high near mid-94s as investors continue to stay away from European currencies. Furthermore, the thin trading volume due to the memorial day holiday in the United States may be causing sharp market reactions.  

On Tuesday, April trade balance figures  and the Q1 employment change numbers will be released from Switzerland. However, these data are unlikely to impact the CHF’s price action as participants will be focused on the political developments and the USD’s performance.

Technical levels to consider

0.9975 (May 23 high) aligns as an interim resistance ahead of the critical 1.0000 (psychological level/parity). Only with a decisive break above that level, the pair could extend its upside to 1.0055 (May 10 high). On the flip side, 0.9935 (May 25 low) could be seen as the first technical support followed by 0.9870 (Apr. 27 low) and 0.9820 (50-DMA).