USD/CHF recovers further from one-month lows amid notable USD strength

The USD/CHF pair climbed to fresh daily tops, around the 0.9175 region during the early North American session and has now reversed a major part of the previous day's losses.

Following an early dip to near one-month lows, the USD/CHF pair staged a solid rebound from the 0.9120-15 region and was supported by a strong pickup in the US dollar demand. Despite the Fed Chair Jerome Powell's dovish testimony on Wednesday, investors seem convinced that the US central bank will tighten its policy sooner than anticipated amid rising inflationary pressures. This, in turn, was seen as a key factor that acted as a tailwind for the greenback and extended some support to the major.

Meanwhile, the USD bulls largely shrugged off the ongoing decline in the US Treasury bond yields and Thursday's mixed US macro releases. Data published by the US Department of Labor (DOL) revealed that there were 360K initial claims for unemployment benefits during the week ending July 10 as against the previous week's upwardly revised reading of 386K. Separately, the NY Fed's Empire State Manufacturing improved sharply to 43 in June, while the Philly Fed Manufacturing Index fell more than expected to 21.9.

However, concerns about the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment, which was evident from a weaker tone around the equity markets. This might extend some support to the safe-haven Swiss franc and keep a lid on any runaway rally for the USD/CHF pair, at least for now. Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near weekly swing highs, around the 0.9200 mark. This should act as a key pivotal point for short-term traders and help determine the next leg of a directional move for the USD/CHF pair.

Technical levels to watch