USD/CHF drops to 3-week lows amid a turnaround in risk sentiment

  • USD/CHF remains under some selling pressure for the second straight session.
  • Weaker risk sentiment provided a modest lift to the CHF’s safe-haven status.
  • A fresh leg down in the US bond yields capped the attempted USD positive move.

The USD/CHF pair failed to capitalize on its early uptick to the 0.9775 area, rather met with some fresh supply and dropped to three-week lows during the early European session on Wednesday.

The pair extended its recent rejection slide from the vicinity of the very important 200-day SMA, or over two-month tops set on February 20, and witnessed some follow-through selling for the second consecutive session on Wednesday.

USD/CHF weighed down by coronavirus concerns

Meanwhile, the latest leg of a sudden fall over the past hour or so was sponsored by an intraday turnaround in the global risk sentiment, which tends to underpin demand for traditional safe-haven currencies, including the Swiss franc.

The early rebound in the equity markets turned out to be short-lived, rather took a turn for the worst amid growing market concerns over the outbreak of the deadly coronavirus beyond China and its impact on the global economic outlook.

The flight to safety was further reinforced by a fresh leg of a downfall in the US Treasury bond yields. In fact, the yield on the benchmark 10-year bond fell to all-time lows and kept a lid on the early attempted US dollar positive move.

The pair was last seen hovering around the 0.9735-30 region, the lowest level since February 6. It will now be interesting to see if the pair is able to attract any buying at lower levels or the current slide marks a near-term bearish breakdown.

There isn't any major market-moving economic data due for release on Wednesday. Hence, investors will keep a close eye on any fresh developments around the coronavirus saga, which might continue to play a key role in influencing investors' appetite for riskier assets.

Technical levels to watch

Some follow-through selling has the potential to drag the pair further toward the 0.9700 round-figure mark en-route the next major support near the 0.9680 horizontal zone. On the flip side, the 0.9760 level now seems to act as an immediate resistance, above which the pair is likely to aim towards reclaiming the 0.9800 round-figure mark.

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