Forexpros – The U.S. dollar edged lower against the Swiss franc on Tuesday, as market sentiment firmed up amid hopes that the European Central Bank is gearing up to lower Spanish and Italian borrowing costs.
USD/CHF hit 0.9966 during European morning trade, the session low; the pair subsequently consolidated at 0.9675, slipping 0.12%.
The pair was likely to find near-term support at 0.9655, Monday’s low and a one-month low and resistance at 0.9738, Monday’s high.
Market sentiment has strengthened in recent days after ECB head Mario Draghi indicated last week that the bank may restart its bond buying program.
But investors remained cautious amid concerns over how effective the ECB’s new bond buying program would be, in the light of differences from the bank’s existing scheme.
Draghi also said that any steps by the bank were conditional on euro zone governments experiencing difficulty on bond markets activating the bloc’s bailout funds to purchase government bonds and accepting strict conditions and supervision.
Earlier Tuesday, a raft of weak euro zone data underlined concerns over the impact of the long running debt crisis on the outlook for growth in the region.
German factory orders tumbled 1.7% in June, almost twice as much as expectations for a 1.0% decline.
A separate report showed that Italian gross domestic product contracted by 0.7% in the second quarter, slightly worse than expectations for a 0.6% contraction.
Meanwhile, the Swiss National Bank said in a report earlier that its foreign currency reserves climbed to a record CHF406.5 billion in July, from an upwardly revised CHF365.1 billion in June, indicating that the central bank has continued its currency market intervention to defend the 1.20 per euro exchange rate floor.
Following the data, Switzerland’s finance minister said the SNB was in a position to stabilize the Swiss franc in an unlimited fashion.
Another report showed that consumer price inflation in Switzerland fell by 0.5% in July, slightly less than expectations for a 0.6% decline.
The Swissie was steady against the euro, with EUR/CHF inching up 0.02% to 1.2015.
Later in the day, Federal Reserve Chairman Ben Bernanke was to speak at an event in Washington DC.
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