USD/CHF holding recovery gains above 0.9700 after US PMI data

The USD/CHF pair has managed to hold on to its recovery gains to 0.9700 handle following the release of slightly lower-than-expected US services PMI.

The US ISM non-manufacturing PMI for July fell short of consensus estimates and dropped to 55.5 as compared to 56.0 expected and June’s 56.5. 

Earlier on Wednesday, a tepid recovery in the greenback, as measured by the US Dollar index, triggered the initial leg of recovery and halted the pair's 5-days losing streak. 

The major got an additional boost from better-than-expected ADP report, which is considered as a precursor of the official jobs report (NFP) slated for release on Friday. 

Hence, market focus would remain on Friday’s payrolls data, which would drive expectations of the Fed rate-hike decision in 2016 and eventually determine the near-term direction for the US Dollar. 

Technical levels to watch

From current levels, 0.9725-30 region (100-day SMA) seems to act as immediate resistance, above which the pair seems to extend its recovery trend immediately towards 0.9760 (50-day SMA). A follow through buying interest above 50-day SMA resistance now seems to negate any near-term bearish bias and help the pair to head back towards testing the very important 200-day SMA resistance near 0.9855-60 region.

On the flip side, 0.9685-80 area now seems to have emerged as immediate support, below which the pair seems to aim back towards testing July/August monthly lows support near 0.9640-35 region. A convincing break below this strong support has the potential to drag the pair below 0.9600 handle, towards testing a short-term ascending trend-line support near 0.9565-60 area.