USD/CHF climbs to 3-day tops, closer to mid-0.9100s as traders eye NFP report

• USD/CHF gains traction for the second straight day and recovers further from multi-year lows.
• A goodish pickup in the USD demand prompted some short-covering move around the major.
• A combination of factors might cap the recovery move ahead of the US monthly jobs report.

The USD/CHF pair edged higher through the early European session and climbed to three-day tops, around the 0.9140 region in the last hour.

The pair managed to catch some fresh bids on the last day of the week and built on its modest bounce from mid-0.9000s – the lowest level since January 2015 set on Wednesday. A goodish pickup in the US dollar demand was seen as a key factor behind the USD/CHF pair’s short-covering move, albeit a slight deterioration in the global risk sentiment might keep a lid on any strong gains.

Concerns over a further escalation in the US-China tensions resurfaced after the US President Donald Trump signed executive orders banning US transactions with Chinese companies that own TikTok and WeChat. The development dented investors appetite for perceived riskier assets – like equities – and might extend some support to the Swiss franc’s safe-haven status.

Meanwhile, the anti-risk flow dragged the yield on the benchmark 10-year US government bond back closer to an all-time closing low level of 0.501%. This comes on the back of doubts over the pace of the economic recovery amid the ever-increasing coronavirus cases. Adding to this, the political stalemate over the next round of the US fiscal stimulus might hold the USD bulls from placing aggressive bets and cap the upside for the USD/CHF pair.

Investors might also prefer to stay on the sidelines ahead of Friday’s important release of the closely watched US monthly jobs report, popularly known as NFP. This makes it prudent to wait for some strong follow-through buying before confirming that the pair might have bottomed out in the near-term and positioning for any further near-term appreciating move.

The US economy is expected to have added 1.6 million jobs in July and the unemployment rate is anticipated to drop to 10.5% from the 11.1% previous. Even a slight miss will be enough to fuel worries that the US labour market recovery was faltering and prompt some fresh USD selling, which should force the USD/CHF pair to resume its well-established bearish trend. 

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