USD / CHF struggles to gain significant traction, remains below 0.9250

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  • A combination of factors helped the USD / CHF gain some positive traction on Wednesday.
  • The rally in US bond yields revived demand for USD and extended some support to the pair.
  • The risk appetite mood undermined the safe haven CHF and contributed to the rally.
  • The lack of solid follow-up buying justifies the caution of aggressive bull traders.

The pair USD/CHF it traded with a slight positive bias during the first half of the European session and updated daily highs, around 0.9250 in the last hour, although it lacked follow-up.

After an initial drop in the 0.9210 area, the USD / CHF pair caught some offers on Wednesday and moved away from the month-long lows, around the 0.9185 region touched the previous day. The rally was sponsored by a modest pickup in demand for the US dollar and the dominant mood of risk appetite, which tends to undermine the safe-haven Swiss franc.

The USD got some support from a further rise in US Treasury yields, bolstered by growing acceptance that the Fed will soon begin to reduce its bond purchases. In fact, the benchmark 10-year US government bond yield soared to the highest level since May, around 1,672% on Wednesday and acted as a tailwind for the dollar.

Furthermore, markets also appear to have begun to weigh in on the possibility of an interest rate hike in 2022 amid concerns about a faster-than-expected rise in inflation. Despite the optimistic expectations of the Fed, the rally in the USD lacked bullish conviction and, so far, has not helped the USD / CHF to capitalize on its modest intraday gains.

Looking at the bigger picture, the USD / CHF pair has been swinging in a familiar trading range for the last week or so. This further makes it prudent to wait for a strong follow-up buy before confirming that the recent corrective pullback has run its course and positioning for any significant appreciation moves.

In the absence of major market-moving US economic releases, traders will be guided by scheduled speeches from Chicago Fed Chairman Charles Evans and Fed Governor Randal Quarles. This, along with US bond yields, will influence the USD. Apart from this, the broader market risk sentiment could give the USD / CHF some boost.

Technical levels

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