USDCHF remains near its yearly low and looks vulnerable around 0.9400

• USDCHF is once again approaching its yearly low amid fresh selling around the dollar.
• Expectations for less aggressive Fed rate hikes and declining US bond yields weigh on the dollar.
• A positive risk tone could weigh on the safe-haven CHF and help limit the pair’s decline.

The USDCHF runs into fresh selling after an initial rally to the 0.9455 region on Tuesday and approaches yearly lows again during the early part of the European session. The pair is currently around the 0.9400 level and is pressured by the sales pitch surrounding the US dollar.

In fact, the dollar index, which measures the performance of the greenback against a basket of currencies, hits a new three-month low amid hopes that the Federal Reserve will hike rates less. The surprising fall in US consumer inflation in October fueled the speculation about a less aggressive tightening of monetary policy of the US central bank. This is evident by the continued decline in US Treasury yields and continues to weigh on the dollar.

Having said that, a positive tone around equity markets could weigh on the Swiss franc of safe haven and help limit the USDCHF’s downside. Thus, prudent to wait for selling below the 0.9370 zone, or the yearly low reached in August, before positioning for any further move lower short term. However, the fundamental undercurrent appears to be leaning firmly in favor of the bears.

Therefore, any recovery attempt could be seen as a selling opportunity and runs the risk of disappearing quickly. Traders now await macroeconomic data from the US, with the release of the Empire State Manufacturing Index and the Producer Price Index (PPI). This, along with speeches from influential FOMC members and US bond yields, will boost demand for the dollar. Also, the broader market risk sentiment should give the USDCHF a new boost.

USDCHF technical levels