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  • USD/CHF edged lower for the fifth consecutive session and dropped to multi-year lows on Tuesday.
  • The US fiscal impasse, the recent slide in the US bond yields continued undermining the greenback.
  • Escalating US-China tensions benefitted the safe-haven CHF and added to the pair’s offered tone.

The USD/CAD pair dropped to fresh multi-year lows, around the 0.9035 region during the early European session, albeit quickly recovered few pips thereafter.

The pair extended last week’s rejection slide from the 0.9200 mark and witnessed some follow-through selling for the fifth consecutive session on Tuesday. The heavily offered tone surrounding the US dollar was seen as one of the key factors that continued exerting pressure on the USD/CHF pair.

The greenback remained depressed in the wake of the political deadlock over the next round of the US fiscal stimulus measures and was further pressured by the recent slide in the US Treasury bond yields. This, coupled with Monday’s softer US macro data further undermined the already weaker USD.

Apart from this, the prevalent cautious mood benefitted the Swiss franc’s safe-haven status and contributed the USD/CHF pair’s slide to the lowest level since January 2015. The global risk sentiment took a hit amid renewed concerns over a further escalation in tensions between the US and China.

In the latest development, the Trump administration on Monday further tighten restrictions on China’s Huawei Technologies aimed at cracking down its access to commercially available chips. However, the optimism over a potential COVID-19 vaccine helped limit deeper losses amid oversold conditions.

The USD/CHF pair quickly bounced around 20 pips from daily lows and was last seen trading with only modest losses, around the 0.9055-60 region. It will now be interesting to see if the pair is able to capitalize on the attempted bounce or meets with some fresh supply at higher levels.

Tuesday’s US economic docket features the release of Building Permits and Housing Starts. The data is likely to pass unnoticed and do little to provide any meaningful impetus to the major as the key focus remains on Wednesday’s scheduled release of the latest FOMC meeting minutes.

Technical levels to watch