- USD / CHF struggled to hold its intraday gains at a multi-week high of 0.9330.
- The USD pullback from a 16-month high triggered some profit-taking around the pair.
- The cautious mood in the market benefited the safe haven CHF and contributed to the decline.
The pair USD/CHF it cut a significant portion of its intraday gains to a seven-week high and was last seen hovering near the lower end of the daily trading range, around the 0.9300 level.
The pair built on the higher-than-expected US CPI-inspired rally from 0.9100 and continued to climb higher during the first half of trading action on Wednesday. This marked the sixth consecutive day of a positive move and pushed the USD / CHF pair to the highest level since the beginning of October.
However, momentum lost steam near the 0.9330 region amid a modest decline in the US dollar from a 16-month high. The USD slump lacked an obvious catalyst and could only be attributed to some profit-taking, which is likely to be limited amid prospects for an early policy tightening by the Fed.
Markets have been weighing the possibility of a Fed rate hike for July 2022 amid concerns about rising inflation. Fed fund futures indicate a high probability of another rise in November. This was reinforced by high yields on US Treasuries, which should act as a tailwind for the dollar.
Meanwhile, concerns about rising consumer prices curbed investors’ appetite for perceived riskier assets. This was evident from the prevailing climate of caution in the equity markets. This, in turn, benefited the safe-haven appeal of the Swiss franc and further contributed to the intraday decline in the USD / CHF pair.
With that said, it will still be prudent to wait for a strong follow-up sell before confirming that the USD / CHF pair has positioned itself for any significant corrective declines. Investors are now looking forward to the US housing market data and Building Permits and Housing Starts for a fresh boost.
This, coupled with speeches from influential FOMC members and US bond yields, will drive demand for USD. Apart from this, the broader market risk sentiment would also play a key role in producing some significant trading opportunities around the USD / CHF pair.
Technical levels
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