USD/CHF clings to strong recovery gains beyond 0.9900 handle

Haresh Menghani FXStreet

• Stages a strong recovery from over 3-week lows.
• Surging US bond yields underpinning USD demand.
• Risk-on environment provides additional boost.

The USD/CHF pair staged a solid rebound on Thursday and has now recovered around 85-pips from over three-week lows touched in the previous session.

Wednesday's slightly better-than-expected US economic data, especially core CPI print, reinforced December Fed rate hike expectations. The same was evident from a sharp rebound in the US Treasury bond yields, which eventually revived the US Dollar demand and has been one of the key factors driving the pair higher.

Meanwhile, global equities returned to positive territory on Thursday and further dampened the Swiss Franc's safe-haven demand, providing an additional boost to the pair's recovery movement.

Currently placed at session tops, around the 0.9930 region, traders now look forward to the release of second-tier US economic data - Philly Fed Manufacturing Index, weekly initial jobless claims and industrial production data.

• US: Focus on jobless claims, import prices and Philly Fed survey - Nomura

The key focus, however, would remain on the tax reform vote, due later today, which should help investors determine the pair's next leg of directional move.

Technical levels to watch

A follow-through momentum beyond 0.9940 level could get extended towards the 0.9970 hurdle before the pair eventually darts towards reclaiming the parity mark.

On the flip side, the 0.9900 handle now becomes an immediate support to defend, which if broken would turn the pair vulnerable to extend its near-term downward trajectory towards the very important 200-day SMA support near the 0.9810-0.9800 region.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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