USD/CHF consolidates daily gains below below 0.97

After rising to the 0.9725 mark and retracing all of its losses from Monday, the USD/CHF pair lost traction in the late NA session and dropped below the 0.97 handle. As of writing, the pair was consolidating its daily gains at 0.9690, still gaining 0.25% on the day.

The pair's price action on Tuesday had been dominated by the US Dollar Index's fluctuations. The DXY spiked up to its best level since late August at 93.10 on Fed Chairwoman Yellen's remarks on the policy outlook before easing back to 92.80/92.90 band. Although Yellen argued that it would be appropriate for the Fed to continue with the gradual rate hikes in light of subdued inflation, she failed to provide a solid-enough clue to convince investors that a December rate hike was imminent, making it difficult for the DXY to sustain its bullish momentum.

• Fed's Yellen: Currently not considering changing inflation target
• Fed's Yellen: U.S. labour market is getting tighter

On the other hand, major equity indexes in the U.S. struggled to make a meaningful recovery on Tuesday, making it easier for the safe-haven CHF to gather strength against the buck. As we approach the end of the day, both the Dow Jones Industrial Average and the S&P 500 indexes are virtually flat on the day.

In the early European session on Wednesday, UBS is going to announce its Consumption Indicator for Switzerland. A positive reading could allow the CHF to gain traction against its peers. However, the pair is unlikely to show sharp price fluctuations before more Fed speakers, Fed Governor Brainard and St. Louis Fed President Bullard, deliver their remarks in the NA session.

Technical outlook

On the downside, 0.9630 (100-DMA/50-DMA) aligns as a critical technical support. A decisive break below that level could open the door for further losses towards 0.9560 (Sep. 15 low) and 0.9500 (psychological level). On the upside, 0.9725 (daily high) is the initial hurdle ahead of 0.9800 (psychological level/May 29 high) and 0.9850 (May 17 high).