USD/CHF turns red below 0.99 as DXY drops to 94 on latest headlines from Italy

• Weak data from the US and positive  developments from Italy weigh on the buck.
• USD/CHF retreats back below 0.99.
• Fed’s Beige Book is coming up next in the NA session.

With the risk appetite crawling back to the markets, the CHF struggled to find demand as a safe-haven during the European session and the USD/CHF pair rose to a daily high of 0.9935 before losing its traction. As the selling pressure witnessed on the greenback intensified on disappointing macroeconomic data releases, the pair erased its daily gains to drop below the 0.99 mark. As of writing, the pair was trading at 0.9805, losing 0.2% on the day.

Following 2 straight days of solid gains, the US Dollar Index made a sharp reversal on Wednesday as investors’ focus shifted to European currencies. In the second half of the day, ADP private sector employment growth came in at  178K to miss the market expectations and the Q1 GDP growth estimate eased to 2.2% from 2.3%. While the weak data kept the bearish pressure on the DXY strong, the latest headlines from Italy pushed the index even further down toward the 94 handle.

According to Reuters, Italy’s 5-Star has called for Paolo Savona to withdraw his candidacy  for economy ministry in order to allow the government to be formed, possibly avoiding an autumn election scenario. As of writing, the US Dollar Index was losing 0.8% at 94.05.

Later in the session, the Fed is going to publish its Beige Book but it’s unlikely to have a significant impact on the price action. The market is already expecting a rate hike in June and anything that points to a solid growth momentum in the US economy wouldn’t be a surprise.

Technical outlook

0.9870 (Apr. 27 low) could be seen as the first interim support ahead of 0.9820 (50-DMA) and 0.9770 (Apr. 24 low). On the upside, 0.9975 (May 23 high) align as the first technical support before 1.0000 (psychological level/parity) and 1.0055 (May 10 high).