USD/CHF snaps two-day downtrend near 0.9000 as US Dollar Index stays firmer despite no deal on debt ceiling

• USD/CHF picks up bids to refresh intraday high during the first positive day in three.
• US Dollar benefits from policymakers’ hopes of avoiding default, hawkish Fed bets, ignores immediate failure to seal debt-ceiling deal.
• Risk catalysts will be the key for directions, US PMIs can also entertain traders.

USD/CHF bulls return to the table after a two-day absence as the US Dollar ignores deadlock in debt ceiling talks to remain firmer. That said, the Swiss Franc (CHF) pair prints mild gains around 0.8990 by the press time.

US Dollar Index (DXY) grinds higher past 103.00 during the two-day uptrend, close to 103.30 at the latest, even as US President Joe Biden and House Speaker Kevin McCarthy failed to offer a deal to avoid the debt ceiling expiry during the latest negotiations.

The reason for the DXY’s rebound could be linked to the policymakers’ optimism of reaching an agreement to avoid the US default. “I just concluded a productive meeting with Speaker McCarthy about the need to prevent default,” said US President Biden per the White House announcements shared by Reuters late Monday. On the other hand, US House Speaker McCarthy said that meeting with Biden was productive but no debt ceiling deal.

Apart from the US default concerns, the hawkish Federal Reserve (Fed) bias also underpins the US Dollar’s strength and propels the USD/CHF price of late. On Monday, Minneapolis Federal Reserve President Neel Kashkari favored the rate hike trajectory while citing the fears of the US default and banking crisis, which in turn allowed the US Dollar to remain firmer. On the same line, St. Louis Federal Reserve President James Bullard ruled out the recession concerns on Monday while saying that He sees two more rate hikes this year before reaching the base rate. Furthermore, Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin and San Francisco President Mary C Daly recently backed the calls for higher rates.

On a different page, downbeat prints of the Swiss Industrial Production for the first quarter (Q1) join the previously firmer US data to also favor the USD/CHF buyers.

It’s worth noting that the mildly bid S&P500 Futures prod the US bond sellers and hence challenge the USD/CHF buyers amid a sluggish Asian session.

To overcome the dull trading, the USD/CHF traders should pay attention to the US first readings of S&P Global Purchasing Managers Indexes (PMIs) for May. Should the activity data arrives firmer and suggests inflation fears, the Swiss Franc pair will have further upside to trace.

Also read: US S&P Global PMIs Preview: Dollar set to rise on a slip in the services sector

Technical analysis

USD/CHF rebounds from a two-week-old ascending support line, close to 0.8980 by the press time, backed by the price-positive oscillators. The recovery, however, remains elusive unless the quote provides a clear break of the 50-DMA, around 0.9030 at the latest.