USD/CHF struggles for a firm intraday direction, confined to a range below 0.9750

  • USD/CHF was seen to consolidate its recent strong uptrend to a nearly two-year high.
  • The Fed’s aggressive rate hike bets continued to support the USD and acted as a tailwind.
  • A positive risk tone weighed on the safe haven CHF and further extended some support.
  • Investors are now watching the US ISM PMI for some momentum, although the focus remains on the FOMC.

The pair USD/CHF fluctuated between tepid gains and minor losses during the first half of the European session and was last seen trading in neutral territory, around the 0.9725 region.

The pair quickly reversed a modest bearish gap that opened below 0.9700 levels on the first day of a new week, though it struggled to capitalize on the move beyond the 0.9750 region. The market’s growing conviction that the Federal Reserve would tighten its monetary policy at a faster pace to curb runaway inflation continued to support elevated US Treasury yields. This, in turn, continued to act as a wind tail for the US dollar and the USD/CHF pair.

Apart from this, a generally positive tone in equity markets undermined traditional haven assets, including the Swiss franc, and provided additional support for spot prices. Despite the supportive factors, the bulls seemed reluctant to place aggressive bets and preferred to wait for the outcome of the 2-day FOMC policy meeting. The Fed is due to announce its decision on Wednesday and is expected to raise interest rates by 50 bps.

Therefore, the focus will be on the Fed’s plan to reduce the size of its balance sheet. Aside from this, investors will take note of this week’s important US macro data, including the closely watched US monthly employment report (NFP), scheduled for the start of a new month. It kicks off a pretty busy week with the release of the US ISM Manufacturing PMI, which, along with US bond yields, will weigh on the USD and give the USD/CHF pair some momentum.

From a technical perspective, the range-bound price action seen over the last three sessions could be classified as a bullish consolidation phase. Furthermore, the fundamental context supports the prospects for an extension of a month-plus upward trajectory, suggesting that any significant decline would still be seen as a buying opportunity. Sustained strength beyond 0.9750 will reaffirm the positive bias and pave the way for further gains.

Technical levels

Source: Fx Street

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