USD/CHF returns above parity with the US dollar surging

• The dollar bounces up from session lows near 0.9900, back above parity.
• Bright US macroeconomic data have boosted the greenback and US Treasury bonds.
• USD/CHF is nearing important resistance at the 1.0030 area.

The US dollar has retraced previous losses against the Swiss Franc on Tuesday’s US session, jumping from levels nearing 0.9900, back beyond 1.0000 on the back of a series of better-than-expected US macroeconomic figures.

Bright US data dampens hopes of a Fed pivot

US labor and manufacturing activity figures have beaten expectations earlier on Tuesday, improving investors’ confidence in the US economy’s health and giving leeway to the Federal Reserve to keep hiking rates aggressively for some time. This sentiment has triggered a knee-jerk reaction in the USD and US Treasury bonds, sending them surging from session lows.

US manufacturing activity data has posted a positive surprise, with a better-than-expected performance in October. The ISM PMI slowed down to 50.2, better than the 50 expected by the market, while the S&P PMI reported a 50.4 reading, which reveals that sector activity grew, when the market expected a moderate contraction, at 49.9 for the second consecutive month.

Beyond that, the JOLTS job openings have reported an increase to 10.7 million vacancies in September, up from 10.2 million in August, instead of the decline to 10 million anticipated by the expert. These figures are consistent with the image of a tight labor market, despite the Fed’s efforts to cool it off in order to curb inflation.

With all eyes on the Federal Reserve, which is widely expected to hike rates by 75 basis points on Wednesday. These figures have eroded the idea that the bank might be forced to slow down its monetary normalization path in December, as had been signaled in recent comments by some Fed officials.

USD/CHF: Approaching an important resistance at 1.0030

From a technical perspective, the pair has improved its near-term bias, returning above the 50 and 200-hour SMA at 0.9970/80 area, to attempt another assault to the 1.0030 level (October 24,25 highs). Above here, the next target would be the three-year high at 1.0145.

On the downside, the mentioned 200-hour SMA at the 0.0970 area is acting as support so far. Below here, the next potential targets are October 30 low at 0.9945 and October 27 high at 0.9920/25.

Technical levels to watch