USD/CHF slumps to session lows as USD weakens on disappointing PMI data

• Business activity growth in the U.S. service sector softens.
• Private sector employment increases more than expected.
• US stocks continue to push higher.

After spending the majority of the day moving sideways in a tight range near the 0.9770 mark, the USD/CHF pair came under a renewed selling pressure in the NA session and fell to a fresh daily low at 0.9737. As of writing, the pair was trading at 0.9741, losing 0.33% on the day.

After failing to rise above the 92 handle despite the hawkish tone seen in the FOMC December meeting minutes on Wednesday, the US Dollar Index started the day on a weak note and failed to take advantage of the upbeat employment report. According to the ADP, private sector employment in the U.S. increased by 250K in December. 

With markets ignoring the positive readings and focusing on the weak data, the US Dollar Index extended its losses after Markit announced that the service sector business activity growth in December softened to its lowest level since May. The final reading of Services Business Activity Index dropped 53.7 in December from 54.5 in November. Moreover, "inflationary pressures eased in December, with both input price and charge inflation softening," Markit noted. Following the disappointing data, the DXY dropped to 91.53 and was last seen at 91.56, where it was down 0.36% on the day.

Meanwhile, major equity indexes in the U.S. preserved their bullish momentum following yesterday's record-setting rally and extended their gains to fresh all-time peaks. At the moment, the Dow Jones Industrial Average and the S&P 500 are adding 0.7% and 0.6% respectively, limiting the pair's drop for the time being.

Technical levels to consider

With a daily close below 0.9735 (200-DMA), the pair could extend its losses toward 0.9700 (psychological level/Jan. 2 low) and 0.9645 (Sep. 25 low). On the upside, resistances align at 0.9780 (daily high), 0.9820 (100-DMA) and 0.9870 (50-DMA).