USD/CHF corrects from 6-month lows, flat on the day

The USD/CHF pair slipped to its lowest level since early November at 0.9763 during the first half of the day as the European stock markets recorded losses, increasing the safe haven demand. Later in the day, the pair started to retrace its losses as the equity indexes in the U.S. started the day higher, allowing the US Dollar Index to hang on to its daily gains. At the moment, the pair is trading at 0.9790, virtually unchanged on the day.

Following yesterday's heavy sell-off, the greenback is making a comeback on Thursday, supported by better-than-expected macro data from the United States. Today's data revealed that the weekly jobless claims in the U.S. decreased to 232K for the week ending May 12, while the Philly Fed Manufacturing Index improved to 38.8 from 22, beating the expectations of 19.5.

However, despite the solid data, the greenback is struggling to gather further strength as there were no fresh developments about the political turmoil in the United States, suggesting that investors are taking profit, rather than adding on to their long USD positions. Furthermore, the equity indexes in the U.S. are recording only small gains after recording their biggest daily drops in nearly eight months yesterday, supporting the view of a technical correction.

Technical outlook

The pair could face the initial support at 0.9765 (Oct. 7 low/daily low) ahead of 0.9700 (psychological level) and 0.9640 (Sept. 29 low). To the upside, resistances could be seen at 0.9800 (psychological level), 0.9850 (May 17 high) and 0.9900 (psychological level).

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