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  • USD/CHF extended its recent retracement slide and remained depressed on Wednesday.
  • The upbeat market mood undermined the safe-haven CHF and helped limit the downside.

The USD selling picked up pace during the first half of the European session and dragged the USD/CHF pair to sub-0.8900 level, or one-and-half-week lows in the last hour.

The pair added to the previous day’s heavy losses and remained under some bearish pressure on Wednesday. The downfall pulled the USD/CHF pair further away from over two-month tops, around the 0.9045 region touched last week, and was exclusively sponsored by a broad-based US dollar weakness.

The USD languished near two-week lows amid growing scepticism about a relatively faster US economic recovery following the release of Friday’s unimpressive US jobs report. That said, the prevalent risk-on flow undermined the safe-haven Swiss franc and helped limit losses for the USD/CHF pair.

The progress in coronavirus vaccination, along with the likelihood for a massive US fiscal spending plan has been fueling expectations for a strong global economic recovery. This, in turn, continued boosting investors’ confidence and remained supportive of the prevalent upbeat market mood.

Meanwhile, the optimism over the US President Joe Biden’s proposed $1.9 trillion COVID-19 stimulus package provided a modest lift to the US Treasury bond yields. However, investors remain divided about the impact of more financial aid on the greenback and refrained from placing any bullish bets.

This sets the stage for a further near-term depreciating move for the USD/CHF pair. Hence, a subsequent fall towards testing the next relevant support, around the 0.8845-40 horizontal zone, looks a distinct possibility as the focus now shifts to the release of US consumer inflation figures.

Technical levels to watch