USD/CHF struggles to extend its gains above 0.99 as Wall Street loses traction

• Mixed macroeconomic data releases from the U.S. don’t allow the greenback to rise decisively.
• US Dollar Index fails to rise above 94.70 ahead of FOMC.
• US Stocks reverse course and turn  negative on the day.

After retreating toward the 0.99 handle during the European trading hours, the USD/CHF gained traction and advanced to the 0.9930 area in the early NA session. However, the pair struggled to extend higher as the greenback started consolidating its daily gains ahead of the FOMC announcements.

The data from the U.S. showed that the business activity in the manufacturing sector expanded at a slower pace than analysts’ expectations with both the ISM and Markit PMI data retreating in July from their respective June levels. On the other hand, the ADP announced that the private sector payrolls increased by 219K to beat the market estimate of 185K. With the data out of the way, investors are now focused on the FOMC announcements.

“The FOMC is widely expected to leave rates unchanged in August and we do not expect any material changes in the policy statement, with only a mark-to-market update to reflect recent pickups to growth and inflation. We do not expect any dissents for a rate hike or changes to the balance of risks,” TD Securities analysts argue.

In the meantime, major equity indexes in the United States reversed course following a positive start to the day to help the CHF find demand as a safe-haven and remain resilient against the buck.

Technical outlook

The pair could face the first technical resistance at 0.9950 (20-DMA) ahead of 1.0000 (parity/psychological level) and 1.0065 (Jul. 13 high). On the downside, supports align at 0.9890/0.9900 (100-DMA/psychological level), 0.9865 (Jul. 31 low) and 0.9820 (Jun. 14 low).