USD/CHF seesaws near 0.9300 as firmer Treasury yields probe US Dollar bears

USD/CHF struggles for clear directions as it makes rounds to 0.9300 during early Wednesday, following the first daily negative closing in three. The Swiss Franc (CHF) pair’s latest weakness could be linked to the run-up in the US Treasury bond yields. However, the holiday season and the cautious optimism in the market seem to challenge the downside momentum.

US 10-year Treasury bond yields rose to the fresh high in six weeks the previous day, sidelined near 3.85% by the press time, as the positive mood surrounding China’s reopening helped renew hopes of faster Fed rate hikes.

The hawkish Fed concerns might have taken clues from the improvement in the US Good Trade Balance for November, $-83.3B versus $98.8B prior, while ignoring softer prints of the US S&P/Case-Shiller Home Price Indices for October, 8.6% YoY versus 9.7% expected and 10.4% previous readings. It’s worth noting that the previously mixed readings of the US inflation and growth figures raised doubts about the Federal Reserve’s (Fed) hawkish move, especially after the US central bank appeared cautiously optimistic over the rate hikes in its latest monetary policy meeting.

Elsewhere, China’s easing of the Coronavirus-linked activity restrictions joined an upward revision to the 2021 Gross Domestic Production forecast to favor the sentiment despite the sluggish holiday season. That said, China mentioned that it would stop requiring inbound travelers to go into quarantine from January 8, the National Health Commission (NHC) said late on Monday, a major step towards loosening its curbs, per Reuters. The news joins China’s National Bureau of Statistics (NBS) upward revision to the 2021 GDP growth to 8.4% from 8.1% previous forecast also favored the risk-on mood.

It should be observed that the optimism surrounding China also allows the Fed hawks to retake control amid fewer challenges to the growth and fears of more inflation, which in turn allows the US Treasury bond yields to remain firmer and underpin the USD/CHF declines.

That said, the light calendar and the year-end holiday season seem to challenge the USD/CHF traders ahead of the Swiss ZEW Survey – Expectations for December, expected -50.5 versus -57.5 prior. Also important to watch will be the US Pending Home Sales for November which holds the market consensus of 0.6% versus -4.6% previous readings.

Overall, USD/CHF bears are likely to witness hardships amid a light calendar but the bulls are surely off the table.

Technical analysis

A two-week-old bullish channel, currently between 0.9235 and 0.9350, suggests a short-term recovery of the USD/CHF pair despite the quote’s repeated failures to cross the 21-DMA hurdle, close to 0.9340 by the press time.