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USD/CHF drops under 0.9900 and signals more weakness ahead

USD/CHF broke another key support. 
Spot about to post first close below the 20-day MA in 2 months.
A weak USD and a rally of EUR sent USD/CHF sharply lower.  

The Swiss franc is having the best day in months against the US dollar. A decline of the greenback across the board and also a rally of the euro weakened the USD/CHF pair. 

Correction accelerates 

Upbeat economic data from the Eurozone boosted the euro during the European session and also pushed the Swiss franc to the upside. USD/CHF was testing 0.9970 before it turned to the downside. First broke below 0.9920 and then the 0.9900 handle. It bottomed during the US session at 0.9880, the lowest since October 26. It was holding near the lows, validating most of the day’s losses. 

A weak US Dollar pushed the pair to the downside. The DXY fell from 94.40 to 93.63, having the biggest slide in months. US bond yields pulled back and equity prices in Wall Street were down modestly. The Dow Jones trimmed losses after reaching 3-week lows at 23,270; near the end, of the session was hovering around 23,400. 

Inflation data from the US failed to offer support to the US dollar. The PPI index rose 0.4% in October, above the 0.1% expected and the y/y rate reached 2.8% the highest since 2012. On Wednesday CPI and retail sales data will be released. 

USD/CHF Levels to watch 

The pair dropped below the 20-day moving average for the first time since mid-September. Short-term technical indicators favor the downside. Below 0.9880 the next target could be seen near 0.9800, 38.2% Fibonacci retirement of the recent rally from 0.9420 to 1.0035. 

The US dollar needs to rise on top of 0.9935 (now a resistance) in order to remove the short-term bearish pressure. Above the next barrier according to the FXStreet’s technical confluence indicator is located at 0.9955 and 1.0000.

 

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