Correction meets support around 0.9350, focus shifts to US PMI

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• USD/CHF is likely to display a volatility contraction ahead of Swiss GDP and US Manufacturing PMI data.
• The Swiss Franc asset has struggled in extending recovery above the horizontal resistance placed around 0.9410.
• A slippage from the RSI (14) into the 40.00-60.00 range indicates a loss in the upside momentum.

The USD/CHF pair is building an intermediate cushion around 0.9350 after a steep correction from above 0.9420 in the early Tokyo session. The Swiss franc asset is expected to turn sideways ahead of the release of the Swiss Gross Domestic Product (GDP) (Q4) and United States ISM Manufacturing PMI data.

On an annualized basis, Swiss GDP is expected to report a contraction of 1.2% vs. an expansion of 0.5% released earlier. As per the consensus, the Swiss economy is expanded by 0.3% in Q4, higher than the 0.2% growth delivered in Q3.

The US ISM Manufacturing PMI is expected to improve to 48.0 from the former release of 47.4. A figure below 50.0 is considered a contraction in activities. Therefore, it would be worth calling it a decline in contraction.

A rebound in the risk appetite of the market participants resulted in a revival for S&P500 after diving last week. The US Dollar Index (DXY) is expected to display a volatility contraction around 104.20.

USD/CHF has corrected after struggling to extend recovery above the horizontal resistance placed from January 6 high around 0.9410. Earlier, the Swiss Franc asset delivered a breakout of the resistance plotted from January 31 high at around 0.9290, which resulted in a bullish reversal. The major is expected to display a volatility contraction pattern before printing a fresh upside.

Advancing 20-and 50-period Exponential Moving Averages (EMAs) at 0.9361 and 0.9316 respectively, add to the upside filters.

The Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range from the bullish range of 60.00-80.00, which indicates a loss in the upside momentum.

For a fresh upside, the asset needs to deliver a break above February 27 high at 0.9429, which will drive the major toward December 6 high at 0.9456 followed by November 25 high around 0.9500.

In an alternate scenario, a breakdown below February 9 low at 0.9161 will drag the asset toward the round-level support at 0.9100. A slippage below the latter will drag the asset toward the February low at 0.9059.

USD/CHF four-hour chart