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USD / CHF remains under pressure near 0.9260 region

  • USD / CHF is moving lower for the second day in a row amid modest USD weakness.
  • A combination of factors should act as a tailwind and help limit any deeper losses.

The pair USD/CHF remains on the defensive during the European session of the jeuves and round two-day lows around the 0.9265-60 region.

The pair has extended the modest retracement of the previous day from the upper end of its weekly trading range, just above the 0.9300 level, and has moved lower for the second day in a row on Thursday. Yields on US Treasuries fell further from the highest since June hit Wednesday and kept the US dollar on the defensive. This, in turn, has put some pressure on the USD / CHF pair, although a combination of factors should help limit any deeper losses, At least for the moment.

The appetite for risk, as evidenced by bullish trading sentiment around the stock markets, could affect the demand for the safe haven Swiss franc. Global risk sentiment witnessed a dramatic shift after Russian leaders reassured Europe on gas supplies. In addition to this, the Republican leader of the United States Senate, Mitch McConnell said his party would allow an extension of the debt ceiling in December to avoid a default on federal debt., which further boosted investor confidence.

In the meantime, rising expectations for an early tightening of monetary policy by the Fed should continue to act as a tailwind for the USD and provide some support to the USD / CHF pair. Investors now seem convinced that the Fed would begin reversing its massive pandemic-era stimulus as early as November. Markets may also have started to price the possibility of a Fed rate hike in 2022 amid concerns that the recent surge in oil and energy prices will fuel inflation.

The fundamental backdrop appears to be tilted in favor of the bulls and supports the outlook for lower buying to emerge. Market participants are now awaiting the US economic calendar, with the release of initial weekly jobless claims. This, coupled with US bond yields, could sway the USD and generate some boost to the USD / CHF pair. Investors will take more indications of the broader market risk sentiment to seize some short-term opportunities.

USD / CHF technical levels

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