USD/CHF rebounds from 5-day lows, looks to close flat below parity

• New York Fed President Williams' hawkish comments triggers a USD recovery.
• Yield curve inversion in the U.S. spark fears over an economic slowdown.
• Inflation in Switzerland declines in November.

The USD/CHF pair fell to a fresh 5-day low at 0.9930 earlier in the day amid broad-based USD weakness but retraced its losses in the second half of the day and advanced to the 0.9980 area, where it was virtually unchanged on the day.

The data published by the Swiss Federal Statistical Office on Tuesday showed that the inflation, measured by the CPI, contracted 0.3% on a monthly basis in November and dragged the annual rate down to 0.9% from 1.1% in October.

On the other hand, the US Dollar Index, which tracks the greenback against a basket of six major currencies, slumped to 96.40 before staging a rebound toward the 97 mark on the back of some hawkish comments from New York Fed President Williams. Williams voiced his support for further gradual rate hikes and explained: "We pay close attention to areas where there may be some signs that the economy may slow faster than we may expect, or signs that some other risks are financially emerging or manifesting themselves. But my baseline forecast is still very positive," as reported by Reuters.

Meanwhile, markets remain concerned about the 5-year bond yield falling below the 2-year bond yield, for the first time since the financial crisis and stay away from risk-sensitive assets, allowing the CHF to limit its losses against its rivals.

• US: Yield curve inversion revives concerns over economic slowdown.

Technical levels to consider

1.0000 (psychological level/parity) stays as the first critical resistance for the pair ahead of 1.0065 (Nov. 5 high) and 1.0130 (Nov. 13 high). On the downside, supports could be seen at 0.9960 (Dec. 3 low), 0.9925 (Nov. 28 low) and 0.9895 (200-DMA).