- USD/CHF reverses intraday decline amid revival in dollar demand.
- A nice rebound in US Treasury yields helps the dollar stem the post-FOMC slide.
- Recession fears could underpin the safe-haven CHF and cap the pair ahead of the US GDP release.
The pair USD/CHF It falls to a three and a half week low during the first half of the European session on Thursday, although it manages to find some support at lower levels. Spot prices have bounced back to the 0.9600 area, although the recovery attempt lacks bullish conviction.
As investors look beyond a less aggressive FOMC, the US dollar is staging a solid rebound from its lowest level since July 6, reached earlier this Thursday, amid a nice rebound in bond yields. of the US Treasury. This is turning out to be a key factor offering some support to the USD/CHF pair.
On Wednesday, Federal Reserve Chairman Jerome Powell eased fears about a more aggressive tightening of monetary policy. Markets, however, seem convinced that the Fed will have to hike 50 basis points at each meeting for the remainder of the year, which, in turn, is acting as a tailwind for US bond yields.
Elsewhere, overnight optimism in US equity markets appears to be fading fairly quickly amid growing concerns about a global economic slowdown. This offers some support to the safe-haven Swiss franc and could cap any significant rally in the USD/CHF pair.
Going forward, the focus is on the release of the US second quarter GDP preview, to be released later in the North American session. The world’s largest economy is expected to have grown at an annualized rate of 0.4% during the April-June period, avoiding a technical recession.
A surprisingly stronger reading would be enough to trigger a further rally in the dollar and prompt aggressive short-covering around the USD/CHF pair. This, in turn, would suggest that spot prices have formed a short-term bottom and would pave the way for some significant appreciation move.
Technical levels
Source: Fx Street
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