USD/CHF erases Tuesday's losses, trades above 0.9950

The USD/CHF pair slumped to a weekly low near the 0.99 handle on Tuesday and closed the third straight trading day in the negative territory. However, the recovering market sentiment on Wednesday made it difficult for the safe-haven CHF to preserve its momentum and allowed the pair to retrace a large portion of its fall. As of writing, the pair was up 0.26% on a daily basis at 0.9952.

Heightened hopes of the United States (US) and China reaching a trade deal and not allowing the conflict to escalate any further cause risk-on flows to dominate the market action on Wednesday. Reflecting the risk-on atmosphere, the 10-year US Treasury bond yield is adding nearly 2% on the day and the S&P 500 Futures is gaining 0.9% to suggest that Wall Street's main indexes are likely to open the day sharply higher.

According to Bloomberg, China is considering the option of making an interim trade deal with China despite the Trump administration's decision to blacklist Chinese technology firms.

USD stays calm ahead of key macro events

Meanwhile, ahead of Federal Open Market Committee (FOMC) Chairman Jerome Powell speech at 15:00 GMT, the US Dollar Index is moving sideways near the 99 mark. Later in the US evening, the FOMC is scheduled to release the minutes of its September meeting as well.

Previewing this event, "the minutes are likely to shed light on the Fed's thinking about the recent surges in repo market rates," TD Securities analysts said.

However, this has been partly addressed by Chair Powell, who stated on Tuesday that the Fed "will soon announce measures to add to the supply of reserves over time."

Technical levels to watch for