- USD/CHF gains continuation traction on Wednesday and rises to a new yearly high.
- Prospects for a rapid rise in US interest rates continue to support the current move higher.
- Investors are waiting for the US ADP report and ISM PMI to gain some momentum ahead of the FOMC decision.
The pair USD/CHF has risen to the highest level since March 2020 during the first half of the European session on Wednesday and now looks to build on momentum beyond 0.9800.
The pair continued its recent strong bull run witnessed in the last month and gained some continuation traction on Wednesday. Prospects for a more aggressive Fed tightening continue to act as a tailwind for the US dollar. Aside from this, a positive tone around US stock index futures weighs on the safe-haven Swiss franc and offers some support to the USD/CHF pair.
Investors seem convinced that the US central bank would adopt a more aggressive response to reduce inflation and would raise the reference interest rate to around 3.0% by the end of the year. This was reinforced by high yields on US Treasuries, which in turn helped the USD to hold steady near a multi-year high. USD bulls, however, preferred to wait for the outcome of the 2-day FOMC policy meeting.
The Fed is expected to announce its monetary policy decision later in the American session and widely expected to raise interest rates by 50 basis points. The US central bank is also expected to start whittling down your massive nearly $9 trillion balance sheet at a likely rate of $95 billion a month. Additionally, comments from Fed Chairman Jerome Powell will offer clues as to the pace of future tightening.
This, in turn, will play a key role in influencing short-term USD price dynamics and providing a further directional boost to the USD/CHF pair. Meanwhile, investors will take cues from the release of the US ADP report on private sector employment and the US ISM Services PMI. However, the immediate market reaction is more likely to be of short duration, which justifies some caution before opening aggressive positions.
USD/CHF technical levels to watch
Source: Fx Street
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