- USD/CHF gained strong follow-through traction for the second day in a row on Tuesday.
- A verbal intervention from the SNB and a recovery in risk sentiment weighed on the CHF.
- Ukraine crisis and rising US bond yields favor bulls and support prospects for further gains.
The pair USD/CHF jumped to a nearly one-month high during the first half of the European session and may now be looking to extend momentum beyond 0.9300.
After a brief consolidation earlier this Tuesday, the USD/CHF pair gained strong positive traction for the second day in a row and built on the overnight rally from the 0.9160 area. The Swiss franc was hit by a verbal intervention from the Swiss National Bank on Monday, reiterating its commitment to intervene in currency markets and a good rally in equity markets. This, in turn, was seen as a key factor that acted as a tailwind for the pair.
Global risk sentiment received a strong boost amid a report that the European Union (EU) is set to outline a plan this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending. This, to a large extent, helped offset the US dollar’s modest retracement from the highest level since May 2020 and did little to hamper the intraday move higher. That said, the worsening situation in Ukraine, coupled with the risk of stagflation, kept optimism limited. This could continue to benefit the dollar’s status as a global reserve currency.
Aside from this, a strong intraday rally in US Treasury yields supports the prospects for some bearish USD buying. This, in turn, suggests that the path of least resistance for the USD/CHF pair is to the upside. Therefore, further strength beyond 0.9300 towards the test of the 2022 high around the 0.9335-0.9340 region remains a distinct possibility. In the absence of major market-moving economic releases, the focus will remain glued to new developments surrounding the Russia-Ukraine saga.
Technical levels
Source: Fx Street
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