- USD/CHF rises to a multi-day high before hitting the 50-day SMA, supported by a multitude of factors
- A positive risk tone weighs on the safe-haven CHF and acts as a tailwind for the pair.
- Expectations for aggressive rate hikes from the Fed revive demand for the USD and contribute to the rise of the pair.
The pair USD/CHF regains some positive traction on Thursday and touches a four-day high, though rally stops just short of 0.9650 after meeting the key 50-day SMA. However, the pair is holding up during the European session and is currently hovering around the 0.9625 area.
The signs of stability in the stock markets weigh on the Swiss franc haven and act as a tailwind for the USD/CHF pair. On the other hand, US dollar attracts fresh buying amid firming expectations for faster Fed monetary policy tightening. This is another factor that has given support to the pair.
Tuesday’s stronger-than-expected US CPI report fueled speculation that the Fed will raise interest rates at a faster pace to control inflation. In fact, the implied odds of a 1% hike at the September FOMC meeting currently stand at 30%. This remains supportive of elevated US Treasury yields and continues to benefit the dollar.
Having said that, the lack of continuation buying and the presence of the 50 SMA at the daily highs warrants caution before positioning for an extension of the rally inspired by the inflation of American consumers. However, the fundamental background suggests that the path of least resistance is to the upside and seems to be tilting in favor of the bulls. A daily close or open above the 50 SMA at 0.9640 would seal the breakout to the upside and give the signal to move higher..
Market participants now await the US economic calendar, with retail sales figures, weekly jobless claims, regional manufacturing indices and industrial production data. This, along with US bond yields, will weigh on the dollar. Apart from this, the broader risk sentiment should give the USD/CHF pair some lift.
USD/CHF technical levels
Source: Fx Street
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