USD/CHF retreats from three-week highs, still above 0.9200

• The Swiss franc recovers versus the dollar, prints fresh lows versus GBP and EUR.
• USD/CHF losses momentum near August highs and retreats.

The USD/CHF peaked during the American session at 0.9234, the highest level since mid-August, and then pulled back, falling to 0.9210. It is still positive for the day and heads for the highest close in almost a month.

The rally of USD/CHF lost momentum before the key barrier seen around 0.9240, where August highs are located. A break above that area should clear the way to further gains, targeting June tops at 0.9275.

The move higher was driven by a stronger US dollar across the board. The greenback continues to recover after last week’s slide. The DXY is up by 0.10%, at 92.60, significantly off highs. Earlier it peaked at 92.83, the highest in a week.

ECB next

On Thursday, the European Central Bank will have its monetary policy meeting. The Swiss franc will likely be affected by the outcome of the decisions and comments from the ECB. “No change in policy settings is expected, but there are risks of a hawkish surprise.  Many of the hawks will point to still-favorable financing conditions as justification to slow the pace of PEPP.  On the other hand, the doves are pushing back with the notion that the jump in inflation is temporary.  Of course, the divide is a north-south one, with Germany, Austria, and the Netherlands all lining up on the hawkish side.  The ECB meeting will be lively, but we think the doves led by Lagarde remain in control”, said BBH analysts.

In the US, the JOLTS report came in above expectation on Wednesday. On Thursday, jobless claims data is due. The key report of the week will be on Friday with the Produce Price Index.

Technical levels