- A combination of divergent forces failed to provide a significant boost to USD/CHF.
- The USD witnessed a prolonged reversal trade and acted as a headwind for the major.
- The risk appetite drive undermined the safe haven CHF and extended support for the pair.
The pair USD/CHF traded between tepid gains/minor losses during the mid European session and was last seen trading around the 0.9280 region, almost unchanged on the day.
The pair gained some traction during the early part of trading on Wednesday, although it continued to struggle to find acceptance or capitalize on the move beyond the round 0.9300 level. Renewed hopes for a diplomatic solution to the war in Ukraine turned out to be a key factor that dented the status of the US dollar as a global reserve currency and acted as a headwind for the USD/CHF pair.
Turkey’s top diplomat Mevlut Cavusoglu announced on Wednesday that Russian Foreign Minister Sergey Lavrov and his Ukrainian counterpart Dmytro Kuleba had agreed to meet on Thursday. This would be the first potential conversation between the two officials since Russian troops invaded Ukraine on February 24, raising expectations of a diplomatic solution and an end to the war in Ukraine.
The news was a much-needed relief for investors, which was evident in the strong positive reaction in equity markets. The risk boost, coupled with some verbal intervention from the Swiss National Bank earlier this week, undermined the Swiss franc and extended USD/CHF support. That said, a further escalation of tensions between Russia and the West could kill optimism.
Indeed, US President Joe Biden on Tuesday imposed an immediate ban on imports of oil and other Russian energy. In addition, Britain announced that it would phase out Russian oil imports by the end of 2022 and the European Union agreed to new sanctions against Russian leaders. The Russian Foreign Ministry reportedly said that the response to Western sanctions will be sensitive and precise.
This is due to growing market concerns about a rapidly deteriorating global economic outlook and a large inflationary shock, which should help revive USD demand. Therefore, it will be prudent to wait for a significant drop before confirming that the USD/CHF pair has topped. Conversely, the bulls could wait for sustained strength above the 0.9300 mark before placing further bets.
Next on the economic docket is the US job openings and job turnover survey, due out later in the early American session. However, the data could do little to influence USD price dynamics or provide a significant boost to the USD/CHF pair, as the focus remains glued to developments surrounding the Russia-Ukraine saga.
Technical levels
Source: Fx Street
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