- USD/CHF fills a modest bearish gap on Monday, though upside potential looks limited.
- The appearance of some buying around the USD is considered the only factor that provides some support to the pair.
- Expectations for a less aggressive Fed, falling US bond yields and a risk-off state will limit gains for the pair.
The pair USD/CHF It attracts some buyers after a modest bearish opening at the 0.9245 zone on Monday and hits a fresh daily high at 0.9312 during early European trading. At the moment, the pair seems to have snapped a two-day losing streak and is looking to ride the momentum beyond the 0.9300 level. At time of writing, the pair is back a few pips from the daily high, now trading at 0.9289 and still up 0.31% on the day.
The US dollar (USD) is advancing slightly on Monday and acting as a tailwind for the USD/CHF pair, although a combination of factors could stop bulls from opening aggressive positions and cap any significant rise in the pair. The prevailing risk-off environment in the market is providing some support to the Swiss franc (CHF) of safe haven. Apart of this, decreasing chances of more aggressive tightening of monetary policy by the Federal Reserve (Fed) further helps limit the pair’s gains, at least for now.
Despite recent emergency liquidity measures and multi-billion dollar aid to troubled US and European banks, concern about the risk of contagion and the prospect of a full-blown global banking crisis has barely shown any sign of abating. Apart from this, looming recessionary risks are weighing on global risk sentiment, which is evident in a prolonged sell-off in equity markets. The current of risk aversion forces investors to take refuge in traditional currencies, such as the CHF.
On the other hand, recent events feed the speculation that the US central bank will soften its hawkish rhetoric to prevent high interest rates from further putting pressure on the economy. In fact, markets are now pricing in a smaller 25 basis point hike at this week’s FOMC meeting, which begins on Tuesday, and that the Fed will cut rates during the second half of the year. This is reinforced by a further sharp decline in US Treasury yields, limiting gains for the dollar and USD/CHF.
Traders also appear reticent, preferring to stay out of the risks of key central bank events this week: the outcome of the highly anticipated FOMC meeting on Wednesday, followed by the Swiss National Bank (SNB) meeting on Thursday. Therefore, it will be prudent to wait for strong continuation buying before positioning for any further intraday upside for USD/CHF in the absence of any relevant economic releases.
USD/CHF technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
