- USD/CHF regained positive traction on Tuesday amid sustained buying interest in the USD.
- The ongoing strong upward move in US bond yields acted as a tailwind for the dollar.
- Gloomy US data capped gains amid risk aversion, which tends to benefit safe-haven CHF.
The pair USD/CHF It maintained its intraday gains during the early American session, although it pulled back a few pips from the daily high and was last seen trading just above 0.9150.
The pair caught fresh offers on Tuesday and is now looking to build on last week’s recovery move from levels below 0.9100, or the lowest level since early November. The momentum was supported by sustained buying interest in the US dollar, which continued to be supported by rising US Treasury yields.
Investors seem convinced that the Fed would start raising interest rates in March 2022 to combat stubbornly high inflation. Expectations were bolstered by last week’s data, which showed US headline CPI rose to the highest level since June 1982 and core CPI posted the biggest advance since 1991.
This, in turn, pushed the benchmark 10-year US government bond yield to the highest level since January 2020 and supported the dollar. That said, a prolonged sell-off in US bond markets weighed on global risk sentiment, benefiting the Swiss franc as a safe haven and acting as a headwind for the USD/CHF pair.
Apart from this, a drop in the US Empire State Manufacturing Index to -0.70 in January from the previous month’s reading of 31.9 prevented the bulls from making aggressive bets on the USD/CHF pair. Even from a technical perspective, spot prices have, thus far, struggled to break back above the very important 200-day SMA.
Investors also seemed reluctant, preferring to wait on the sidelines before the next FOMC monetary policy meeting on January 25-26. This makes it more prudent to wait for strong follow-on buying before confirming that last week’s drop from the 0.9275-0.9280 region, or a nearly one-month high, has come to an end.
Technical levels
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