- USD/CHF jumped to a new yearly high on Wednesday amid prevailing buying interest in the USD.
- Bets on aggressive Federal Reserve rate hikes and a gloomy global economic outlook continued to boost the USD.
- The risk boost could undermine the safe-haven CHF and supports prospects for further earnings.
The pair USD/CHF it pulled back a few pips from its highest level since May 2020 reached during the first half of the European session and was last seen trading just below 0.9650.
The pair continued its recent strong bull run witnessed since the beginning of this month and gained follow-up traction for the fifth day in a row on Wednesday. The momentum was supported by sustained buying around the US dollar, which rose to a more than two-year high amid prospects for more aggressive policy tightening by the Federal Reserve.
Investors now expect the Fed to raise interest rates by 50 bps at each of its next four meetings in May, June, July and September. Bets were bolstered by recent aggressive comments from influential members of the FOMC, including Fed Chairman Jerome Powell. This, coupled with the deteriorating global economic outlook, boosted the dollar’s reserve currency status.
Expectations of rapid interest rate hikes in the US, the protracted conflict between Russia and Ukraine, and the latest outbreak of COVID-19 in China have raised fears that global growth will stall. Investors now appear worried that Russia might make good on its threat to stop gas flows to countries that refuse to pay for fuel in rubles and cut off supplies to Europe.
That said, the extremely overbought conditions prevented traders from making further bullish bets and kept any further gains for the USD/CHF pair at bay, at least for now. However, the intraday bias remains tilted in favor of the bulls amid strong bullish sentiment prevailing around the USD and risk aversion momentum tending to undermine the safe haven Swiss franc.
Market participants are now looking forward to second-tier US economic releases to gain some momentum later in the early American session. The data, coupled with Fed rate hike expectations, would influence USD price dynamics. Traders will take more into account the broader market risk sentiment to take advantage of some short-term opportunities around the USD/CHF pair.
Technical levels
Source: Fx Street
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