USDCHF declines towards 0.8900 as USD index corrects further, US Durable Goods Orders eyed

  • USD/CHF is declining towards 0.8900 amid further correction in the US Dollar Index.
  • Federal Reserve might remain hawkish while guiding on terminal rates if Durable Goods Orders data land above expectations.
  • Solid Swiss ZEW Survey-Expectations would convey improving business conditions which will increase labor demand and will propel consumer spending.
  • USD/CHF has attempted a recovery after testing prior support levels plotted from 0.8860 with weak selling pressure.

USD/CHF has witnessed a steep fall after failing to sustain above the critical resistance of 0.8920 in the early European session. The Swiss Franc asset is declining towards the round-level support of 0.8900 as the US Dollar Index (DXY) has extended its correction further. The absence of anxiety among investors ahead of the United States Durable Goods Orders data has trimmed the appeal for the US Dollar Index.

S&P500 futures have added significant gains in early Europe. The 500-US stocks basket witnessed an intense sell-off on Tuesday after vulnerable quarterly earnings from the First Republic Bank renewed fears of a banking fiasco. The United States commercial bank reported a steep decline in deposits from customers, which forced it to rely on external borrowings that come with heavy interest tags. Significant gains added in S&P500 futures in early Asia indicate a recovery in the risk appetite of the market participants.

Meanwhile, the demand for US government bonds has trimmed as investors have started ignoring US banking woes. The 10-year US Treasury yields have rebounded to near 3.41%.

Bottomed out US housing sector recedes fears of economic slowdown

US Commerce Department reported on Tuesday that New home sales surged 9.6%, the highest level since March 2022. The economic data indicates that US real estate sector which was going through a rough phase due to higher interest rates from the Federal Reserve (Fed) is bottoming out. This has trimmed the risk of soon recession as investors believe that more construction proposals will accelerate labor demand, which will eventually propel consumer spending. Usually, the impact of the recession is first observed in the property sector, and bottoming out real estate indicates that the economic slowdown shall postpone.

Investors await US Durable Goods Orders data for further guidance

There is no denying the fact that the Federal Reserve is widely anticipated to announce a consecutive 25 basis point (bp) in the first week of May. As the event is widely expected, investors are keenly focusing on the interest rate guidance to be provided by Fed chair Jerome Powell. The release of the monthly US Durable Goods Orders (March) would provide cues about guidance on terminal rates. As per the consensus, the economic data has expanded by 0.8% in March against a contraction of 1.0% reported in February.

An expansion in orders for Durable Goods to manufacturers indicates strong demand from households, which could keep the core Consumer Price Index (CPI) stubborn ahead and may force the Federal Reserve to remain hawkish while delivering guidance on interest rates. It is worth noting that US core inflation is not softening consistently and a further jump in Durable Goods demand could spoil the market mood.

Swiss ZEW Survey-Expectations in focus

On Wednesday, a power-pack action is expected from the Swiss Franc amid the release of the ZEW Survey-Expectations data. The street is anticipating that business conditions will improve to -18.9 from the former release of -41.3. An occurrence of the same might support the Swiss Franc ahead. Also, improving business conditions indicate strong labor demand and robust consumer spending.

USD/CHF technical outlook

USD/CHF has attempted a recovery after testing prior support levels plotted from April 13 low at 0.8860 with weak selling pressure on a two-hour scale. The 100-period Exponential Moving Average (EMA) at 0.8938 has acted as a major roadblock for the US Dollar bulls. Southward-sloping trendline from March 21 high at 0.9317 will continue to act as a barricade for the greenback.

The Relative Strength Index (RSI) (14) is making efforts to overstep 60.00, which will trigger an upside momentum.

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