USD/CHF drops below 0.98, erases Tuesday's gains
- DXY plummets below 92.
- Risk appetite remains weak on Wednesday.
After gaining more than 60 pips on Tuesday, the USD/CHF pair reversed course on Wednesday and broke below the 0.98 to renew its 2-day low at 0.9753. As of writing, the pair was trading at 0.9770, losing 0.54% on the day.
Today's sharp drop seems to be a product of a broad-based greenback weakness. News of China considering to stop buying US Treasuries weighed on the buck on Wednesday, pulling the US Dollar Index back below the 92 mark. "Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter," Bloomberg reported. The DXY dropped from 92.20 to a daily low of 91.66 in a matter of minutes and started to correct its losses. At the moment, the index is at 91.80, down 0.45% on the day.
Today's data from the U.S. showed that the import price index rose by 3% in 2017, meeting the market estimate, while the export price index surpassed the experts' expectation of 2.3% as it came in at 2.6%.
Meanwhile, in a speech on Wednesday, Chicago Fed President Charles Evans said that he expected the economy to grow around 2.5% both in 2018 and 2019 and added that the accommodative policy would continue to help boost the inflation. There was no apparent market reaction to these comments.
Later in the day, the CHF could continue to gather strength against the USD if the negative market sentiment weighs on major equity indexes in the U.S.
Technical levels to consider
The pair could face the first support at 0.9735 (200-DMA) ahead of 0.9700 (psychological level/Jan. 2 low), and 0.9645 (Sep. 25 low). On the upside, resistances align at 0.9825 (100-DMA), 0.9915 (Dec. 26 high) and 1.0000 (psychological level).