USD/CHF clings to modest recovery gains near 0.9140 area, lacks follow-through

• A modest pickup in the USD demand assisted USD/CHF to snap seven days of the losing streak.
• Sliding US bond yields, the impasse over US fiscal stimulus kept a lid on attempted USD bounce.
• A turnaround in the global risk sentiment benefitted the safe-haven CHF and capped the upside.

The USD/CHF pair held on to its modest gains through the early part of the European trading action and was last seen hovering near the top end of its daily range, around the 0.9140 region.

The pair managed to regain some positive traction on Thursday and recovered a part of the previous day’s sharp fall to the lowest level since May 2015. As investors looked past a dovish Fed statement, the US dollar staged a goodish rebound from more than two-year lows and prompted some short-covering move around the USD/CHF pair.

The pair snapped its seven consecutive days of losing streak, albeit lacked any strong follow-through and was being capped by a combination of factors. A sharp turnaround in the global risk sentiment – as depicted by a fresh leg down in the equity markets – extended some support to the Swiss franc’s perceived safe-haven status.

The anti-risk flow was reinforced by a steep decline in the US Treasury bond yields, which coupled with the impasse over the next round of the US fiscal stimulus kept a lid on any strong gains for the greenback. Republicans and Democrats have been struggling to reach a deal before the expiry of some earlier measures later this week.

Market participants now look forward to the US economic docket, highlighting the release of Advance Q2 GDP report. The world’s largest economy is expected to have collapsed by a record 34.1% during the second quarter of 2020. The data will influence the USD price dynamics and produce some meaningful trading opportunities later this Thursday.

Technical levels to watch