USD/CHF rebound approaches 0.9550 as sour sentiment favors USD ahead of NFP

• USD/CHF begins the key week on a positive note around one-month low, consolidates two-week losses.
• Risk appetite weakens amid fears of fresh US-China tussles over Taiwan, cautious mood ahead of key data also weigh on sentiment.
• US dollar bulls await ISM PMIs for July for immediate directions after recently hawkish Fedspeak, mixed data.
• Swiss holiday could restrict intraday moves but risk catalysts may entertain traders.

USD/CHF portrays the market’s cautious mood as it rebounds from a monthly low to 0.9525 during the initial hours of Monday’s Asian session. In doing so, the Swiss currency pair (CHF) takes clues from the likely escalating tensions between the US and China, as well as justifies the market’s anxiety ahead of the key US Purchasing Managers Index (PMI) data and jobs report for July.

US House Speaker Nancy Pelosi begins her Asia visit but the schedule doesn’t mention her Taiwan visit The reason could be attributed to Beijing’s warnings. “Six people familiar with the Chinese warnings said they were significantly stronger than the threats that Beijing has made in the past when it was unhappy with US actions or policy on Taiwan,” said the Financial Times (FT).

It’s worth noting that the recently mixed data from the US, mainly highlighting the inflation pressure, join hawkish Fedspeak to also underpin the US dollar’s safe-haven demand. On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose to 4.8% YoY for June versus 4.7% prior. Following that, Minneapolis Fed President Neil Kashkari mentioned to the New York Times (NYT) that the Fed is still a long way away from backing off rate hikes. The policymaker added, “Hiking rates by half a point at coming Fed meetings seems reasonable to me.”

Even so, the US Dollar Index (DXY) marked the second consecutive weekly fall after the US Federal Reserve (Fed) Chairman Jerome Powell highlighted data-dependency and neutral rates. Also drowning the greenback was the “technical recession” in the US after the Annualized readings of the US Q2 Gross Domestic Product (GDP) dropped for the second straight quarter.

It should be noted that the Wall Street benchmarks cheered the receding hawkish bias from the Fed but the US Treasury yields remained pressured as traders rush for risk safety amid recession fears. That said, the S&P 500 Futures print mild losses at around 4,120 by the press time.

Moving on, a holiday in Switzerland may restrict immediate USD/CHF moves but updates surrounding the US-China and the US recession may entertain traders. Also important will be the US ISM Manufacturing PMI for July and the ISM Services PMI for the said month, not to forget Swiss Consumer Price Index (CPI) data. However, major attention will be given to this week’s US Nonfarm Payrolls (NFP) amid calls for neutral rates and economic slowdown.

Technical analysis

Although June’s low of 0.9495 restricts the immediate downside of the USD/CHF prices, recovery moves need validation from a two-week-old resistance line, around 0.9560 by the press time, to convince buyers.