USD/CHF eases off highs, preserves small gains above 0.97

After touching its highest level since August a16 at 0.9747 in the early NA session, the USD/CHF pair reversed course and erased the majority of its daily earnings. As of writing, the pair was trading at 0.9720, gaining 0.2% on the day.

The pair's modest rise on Thursday was supported by the robust performance of the major European equity indexes, which dented the demand for traditional safe-havens like the CHF. The Euro Stoxx 600 Index closed the day 0.28% higher and the German DAX 30 added 0.25%. However, Wall Street started the day flat and struggled to extend its gains, making it easier for the CHF to start erasing its losses against the USD.

Moreover, the falling US T-bond yields weighed on the greenback, pushing the US Dollar Index below the 92 handle despite upbeat macro data from the United States. Today's data revealed that weekly jobless claims decreased by 23K to 259K. Moreover, the Philly Fed Manufacturing Index improved to 23.8 from 18.9 on a monthly basis in September, surpassing the market expectation of 17.2. Nonetheless, the DXY is now in a consolidation phase just a tad above the 92 handle and is losing around 0.2% on the day.

• US: Weekly initial claims was 259,000, a decrease of 23,000 from previous week
• Philly Fed: Index for current manufacturing activity in the region increased 5 points to 23.8

On Friday, the economic docket from the U.S. will feature Markit PMI data for the manufacturing and the service sector. However, investors are likely to remain focused on the heightened expectations of a Fed rate hike before the end of the year. The CME Group FedWatch Tool is now showing that the probability of 25 basis points hike in December is at 75%. 

• Fed still on track for hikes - HSBC

Technical outlook

The RSI indicator on the daily graph floats above the 50 mark, signaling that the bullish momentum is likely to continue to dominate the price action. The initial hurdle for the pair could be seen at 0.9765 (Aug. 16 high) ahead of 0.9810 (May 30 high) and 0.9900 (psychological level). On the downside, supports align at 0.9635 (100-DMA), 0.9590 (20-DMA) and 0.9500 (psychological level).