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  • The Swiss Franc (CHF) benefited from the US-China tussle over the Hong Kong bill.
  • Uncertainty surrounding Brexit, doubts over global growth adds to the risk-off mood.
  • US data, Fedspeak and trade/political headlines will be the key to follow.

With the latest risk aversion supporting the Swiss Franc, USD/CHF pulls back to 0.9980 by the press time of early Wednesday.

Among many, the key reason for the present risk-off can be ascertained to the US-China tussle over the Hong Kong bill that was recently passed by the United States’ (US) House of Representatives. Even if the same is yet to cross the Senate in order to become a law that requires the US to check Hong Kong’s sovereignty on an annual basis, China has already warned its to-be trading partner to stay away from internal matters.

The bill is likely to add to the fears of another failed round of trade talks between the US and China, which in turn could weigh on the global economy. It should be noted that the International Monetary Fund (IMF) recently cut down global growth forecast to the lowest since the Great Financial Crisis (GFC) citing trade pessimism as the key reason.

Other than trade worries, doubts over the Brexit, expectations of further easing by China and a rate cut from the Bank of Korea, add weakness to the pair.

Traders will now keep a close tab on the trade/political headlines while also not missing on the US Retail Sales and Fedspeak for predicting near-term pair moves.

Technical Analysis

FXstreet Analyst Haresh Menghani holds near-term bullish bias considering a two-month-old rising channel. However, chances of immediate pullback can’t be denied:

“Given the pair’s repeated bounce from a support marked by the lower end of a two-month-old ascending trend-channel, the near-term bias remains tilted in favour of bullish traders. Moreover, technical  indicators  on hourly charts have been losing positive momentum but maintained their bullish bias on the daily chart, supporting prospects for some dip-buying interest. Hence, any meaningful slide might still be seen as an opportunity to initiate some fresh bullish positions near the mentioned trend-channel support, currently near the 0.9935 region. Meanwhile, a sustained strength beyond the parity mark might prompt some technical buying and accelerate the momentum further towards the recent swing highs near the 1.0025-30 region.”