- USD/CHF is witnessing a corrective pullback from a two-year high amid modest USD weakness.
- Risk appetite could weigh on the safe-haven CHF and help limit any significant decline.
- Expectations of an aggressive Fed rate hike and a nice rally in US bond yields also favor USD bulls.
The pair USD/CHF has fallen to a new daily low during the European session and could now be looking to extend the corrective pullback below the psychological level of 1.0000.
The pair has moved lower on the last day of the week and now has given back some of the previous day’s strong move to the 1,050 area, its highest level since May 2019. The drop could be attributed solely to some profit-taking amid a modest US dollar pullback from a two-decade high, though a combination of factors should help limit any significant decline.
A rally in global stock markets could weigh on the safe-haven Swiss franc and act as a tailwind for the USD/CHF pair.. Risk appetite was bolstered by a strong rebound in US Treasury yields, which coupled with prospects of more aggressive Fed tightening should lend support to the dollar and the pair. USD/CHF.
Fed Chairman Jerome Powell also reaffirmed on Thursday that the central bank is willing to raise interest rates by 50 basis points at each of the next two meetings. Powell further promised that the Fed was prepared to do more to curb rising inflation.. However, the fundamental backdrop still seems to lean heavily in favor of dollar bulls.
Therefore, it will be prudent to wait for a strong follow-up of selling before confirming that the USD/CHF pair has topped out in the near term and positioning for a further correction. Market participants are now awaiting the release of the US preliminary Michigan Consumer Sentiment Index to gain further momentum at the start of the American session.
USD/CHF technical levels
Source: Fx Street
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