The USD/CHF currency pair continued its decline for a second day on Thursday, dropping further from its six-month high near 0.9245. Supported by a slight decline in the value of the US dollar, spot prices fell to a multi-day low in the middle of the 0.9100s during the Asian session.

The US Dollar Index (DXY), which measures the strength of the greenback relative to a basket of other currencies, fell further overnight from a nearly 11-month high hit on Tuesday, with weaker Fed rate rise projections in 2023 being a major factor. Below expectations and down from August’s upwardly revised 180K, the US ADP said on Wednesday that private-sector employers gained 89K jobs in September.

The Federal Reserve has stopped raising interest rates after the US ISM Services PMI dropped from 54.5 to 53.6 in September. As US Treasury bond rates continue their corrective slide, profit-taking in USD drives the currency pair lower. The market still believes that the Federal Reserve would keep its tough stance and raise interest rates gradually.

As a result of the hawkish stance, US bond yields may rise, which might limit a significant fall in the USD. This and signs of stability in the equity markets weaken the CHF, making it prudent to exercise caution before placing large bearish wagers on the USD/CHF pair. Investors have the option of waiting until Friday’s highly anticipated NFP data.

Moreover, the US Initial Weekly Jobless Claims data, US bond yields, and market risk sentiment on Thursday will impact the early North American session. However, the fundamental environment supports positioning for any considerable decline of the USD/CHF pair after substantial follow-through selling has shown that the USD/CHF pair has topped out.

Trade Idea:

Consider a cautious approach to USD/CHF, given the recent retreat from multi-month highs. Hawkish Fed expectations may limit USD losses. Monitor key data releases and market sentiment before establishing strong bearish positions.