- USD / CHF gains some continuation traction on Tuesday and shoots up to multi-week highs.
- The optimistic expectations of the Fed continue to prop up the USD and support the upward movement of the pair.
- The pullback in US bond yields and cautious sentiment could limit earnings ahead of US retail sales.
The pair USD/CHF has recovered from an intraday drop to the 0.9235 region and has soared to highs of over four weeks during the European session on Tuesday, although it lacks continuation. At time of writing, the pair is trading near daily highs around the region of 0.9270-75.
The pair attracted some lower level buying on Tuesday and is now looking to take advantage of the bullish move from the 0.9100 level led by a warmer-than-expected UK CPI from last week. The rally is driven solely by underlying bullish sentiment around the US dollar, bolstered by prospects for an early tightening of monetary policies by the Fed.
The dollar held firm near 16-month highs amid growing market acceptance that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. It’s worth remembering that data released last Wednesday showed that US consumer prices in October rose at the fastest pace since 1990.
In fact, markets have been pricing in price the possibility of an eventual Fed rate hike by July 2022 and Fed fund futures indicate a high probability of another rate hike for November. That said, the pullback in US Treasury yields prevented the USD bulls from opening new positions and limited any further gains for the USD / CHF pair.
In the meantime, cautious market sentiment, as shown in a softer tone around the stock markets, extended some support to the safe-haven Swiss franc. This was seen as another factor that further contributed to limiting the rise in the USD / CHF pair. Investors also prefer to wait on the sidelines before the release of US retail sales figures.
Key US data will be released at the start of the US session. This, coupled with US bond yields and speeches from a number of FOMC members, could influence price dynamics around the USD. Investors will take more indications of the broader market risk sentiment to seize some short-term opportunities around the USD / CHF pair.
USD / CHF technical levels
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