USD/CHF renews monthly low around mid-0.9600s with eyes on US PMIs, Fed’s Powell

• USD/CHF holds lower grounds after refreshing multi-day low.
• Risk-on mood, softer US dollar keep sellers hopeful ahead of a busy day.
• ECB vs. Fed drama, US President Biden’s jest to remove Trump-era tariffs on China underpin firmer sentiment.
• Preliminary readings of S&P Global PMIs for May, speech from Fed Chairman Powell will be crucial for immediate direction.

USD/CHF refreshed its monthly low to 0.9627, before consolidating losses near 0.9658, as the US dollar extends the previous week’s losses amid firmer sentiment. However, the Swiss currency (CHF) pair recently turned sidelined amid cautious sentiment ahead of the key US PMIs for May and a speech from Federal Reserve (Fed) Chairman Jerome Powell.

The US Dollar Index (DXY) extends the first weekly loss in seven as mixed covid signals from China, mostly positive, join the repeated Fedspeak around a 50 bps rate-hike, contrary to the recently hawkish comments from the ECB policymakers. Also weighing on the greenback were the headlines from Japan where US President Joe Biden mentioned that he is considering reducing tariffs on China.

That said, firmer prints of the US Chicago National Activity Index for April, to 0.47 versus 0.36 flashed in March, also eased the market’s pessimism and back sentiment suggesting no surprise rate hike from the Fed than already conveyed. On the contrary, the European Central Bank (ECB) President Christine Lagarde signaled an end to the negative rates by Q3, suggesting a lift in the benchmark rate in July, which in turn propelled the bloc’s currency and shortened the ECB vs. Fed divergence that drowned the greenback.

Amid these plays, Wall Street ended Monday on a positive note and the US Treasury yields also rose as traders turn cautiously optimistic prior to the key data/events.

That said, the preliminary readings of the S&P Global Manufacturing and Services PMIs for May will be crucial amid hopes of stabilization in the market’s confidence. Also, Fed’s Powell is always the key catalyst to move the markets and can do so if refrained from the usual support for a “normal” rate hike trajectory. Additionally, headlines from the Quad Summit in Tokyo and concerning the covid will also be important for USD/CHF traders to watch for fresh impulse.

Technical analysis

50-day EMA joins the 50% Fibonacci retracement of March-May upside, around 0.9615-05, to put a short-term floor under the USD/CHF prices. Meanwhile, recovery remains elusive until witnessing a clear break of the 21-day EMA level surrounding 0.9770.