USD/CHF sellers attack 0.8970 support despite downbeat Swiss Industrial Production, sluggish US Dollar

• USD/CHF prods 12-day-old ascending support line, extends the previous day’s pullback from 1.5-month high.
• Swiss Q1 Industrial Production growth eased to 3.4% YoY versus 6.1% prior.
• US Dollar traces sluggish markets amid mixed concerns about debt ceiling, Fed.
• US PMIs, Fed Minutes to decorate calendar but US default updates will be crucial for immediate directions.

USD/CHF retreats to 0.8975 as bears jostle with a short-term support line amid the early hours of Monday’s European session. In doing so, the Swiss Franc (CHF) pair fails to justify downbeat first quarter (Q1) Industrial Production growth from Switzerland amid the US Dollar’s failure to cheer the recent positive headlines taming US default fears and hawkish Federal Reserve (Fed) bets.

That said, the Swiss Q1 Industrial Production marked the slowest growth since the fourth quarter (Q4) of 2021 with 3.4% YoY figures compared to 6.1% previous readings. With this, the data defend the Swiss National Bank’s (SNB) hesitance in increasing the benchmark rates after heavily fueling the borrowing costs.

On the other hand, the US Dollar Index (DXY) picks up bids to pare intraday losses around 103.10 but remains down for the second consecutive day amid looming uncertainty surrounding the US debt ceiling expiry. Also challenging the US Dollar’s rebound could be the recently mixed concerns about the Sino-American ties and the Fed’s next moves, despite the latest round of mostly upbeat US data.

US President Joe Biden said at the end of the Group of Seven (G7) summit in Japan on Sunday, that he expected ties with China to improve “very shortly” after a spat over an alleged spy balloon earlier this year derailed relations, per Bloomberg. On the contrary, China’s banning of Micron Technology products, per the Wall Street Journal (WSJ), flags fears of the US-China tussles. US President Biden also conveyed optimism about his discussion with Republican House Speaker Kevin McCarthy went well while also adding that they will again talk on Monday.

On the flip side, Fed Chair Jerome Powell highlighted inflation fears on Friday but also stated that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. During the weekend, Minneapolis Federal Reserve Bank President Neel Kashkari pushed back the talks of the Fed’s policy pivot despite suggesting readiness to vote for holding the rates unchanged. Even so, the market’s bets of a 0.25% Fed rate hike in June increased and the calls for a rate cut in 2023 have gone down due to the last week’s upbeat US economics and hawkish comments from the Fed (Fed) officials.

While portraying the mood, S&P500 Futures reverse the initial downside while making rounds to 4,205, indecisive around the yearly high, whereas the US Treasury bond yields struggle for clear directions but stay pressured of late.

Looking ahead, a softer start to the key week is expected for the USD/CHF amid mixed clues and a light calendar. However, May month PMIs, US debt ceiling talks and Fed Minutes are crucial for a clear guide. Additionally important is the Fed’s preferred inflation gauge, namely Core PCE Price Index.

Technical analysis

The receding bullish bias of the MACD signals and failure to cross the USD/CHF pair’s March-May downside, close to 0.9055 by the press time, keeps the sellers hopeful. However, a convergence of the two-week-old ascending trend line and the 21-day Exponential Moving Average (EMA), close to 0.8965 at the latest, appears a tough nut to crack for the bears to take control.