USD/CHF advances above 97 on solid ADP report

Following a failed attempt to stay above the 0.97 handle, the USD/CHF pair eased to 0.9690 ahead of the NA session start but gathered momentum once again as the private sector employment report from the U.S. beat the expectations. After reaching its session high at 0.9717, the pair went into a consolidation phase in the last hour and is now trading at 0.9710, gaining 0.32%, or 31 pips, on the day.

According to ADP, private-sector employment in the U.S. increased by 253K on monthly basis in May, led by the professional and business service, which recorded their strongest monthly increase in more than a decade. Other data from the U.S. showed that the advance figure for seasonally adjusted initial claims rose to 248K from 235K for the week ending May 26. However, the less volatile 4-week average remained near its lowest level in more than 40 years.

• US: Weekly initial claims was 248,000, an increase of 13,000 from the previous week
• US: Private-sector employment increased by 253,000 from April to May - ADP

On the other hand, Federal Reserve's Governor Jerome Powell earlier in the NA session suggested that it would be appropriate for the Fed to continue gradual rate hikes as the recent inflation data points to a rebound. Following the upbeat ADP data and these hawkish comments, the US Dollar Index holds on to its gains above the 97 handle. At the moment, the index is at 97.12, up 0.22% on the day.

Technical outlook

With a decisive break above 0.9740 (May 30 high), the pair could extend its bullish momentum towards 0.9800 (psychological level/Fibo 23.6% retracement of May 11-22 drop) and 0.9845 (Fibo 38.2%). On the flip side, 0.9665 (May 31 low/near 6 months low) is a critical support ahead of 0.9640 (Sept. 29 2016 low) and 0.9600 (psychological level).