- USD/CHF witnessed a subdued/range-bound price action on the first day of a new trading week.
- The risk-off mood underpinned the safe-haven CHF and capped any meaningful gains for the pair.
- Sliding US bond yields kept the USD bulls on the defensive; the hawkish Fed helped limit losses.
The USD/CHF pair now seems to have entered a bullish consolidation phase and oscillated in a range through the early European session. The pair was last seen trading around the 0.9210-15 region, just below two-month tops.
A combination of diverging forces failed to assist the USD/CHF pair to capitalize on last week's hawkish FOMC-inspired strong move up, instead led to range-bound price action on Monday. The prevalent risk-off mood – as depicted by a weaker trading sentiment around the global equity markets – underpinned the safe-haven Swiss franc.
On the other hand, the ongoing sharp decline in the US Treasury bond yields kept the US dollar bulls on the defensive and further collaborated towards capping the gains for the USD/CHF pair. That said, the Fed's surprise hawkish shift continued acting as a tailwind for the greenback and should help limit any meaningful pullback for the pair.
It is worth recalling that the Fed stunned investors at the end of June policy meeting on Wednesday and brought forward its timetable for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 as against policymakers projection for no increase until 2024 in the March meeting.
Adding to this, St. Louis Fed President James Bullard said on Friday that the Fed Chairman Jerome Powell officially opened taper discussion at the last meeting. Speaking to CNBC, Bullard added that the shift toward a faster tightening of monetary policy was a natural response to stronger economic growth and a quicker than expected rise in inflationary pressures.
Meanwhile, technical indicators on short-term charts are already flashing overbought conditions. This seemed to be another factor that held traders from placing any aggressive bullish bets. Nevertheless, the fundamental backdrop supports prospects for an extension of the recent sharp bounce from multi-month lows, around the 0.8925 region touched earlier this month.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops to near 1.0850, further support at nine-day EMA
EUR/USD continues to lose ground, trading around 1.0860 during the Asian hours on Friday. From a technical perspective on a daily chart analysis indicates a sideways trend for the pair as it continues to lie within the symmetrical triangle.
GBP/USD posts modest gains above 1.2650, focus on the Fedspeak
The GBP/USD pair posts modest gains near 1.2670 during the Asian session on Friday. Meanwhile, the USD Index recovers some lost ground after retracing to multi-week lows near 104.00 in the previous session.
Gold price gains ground, with Fed speakers in focus
The Gold price trades with a positive bias on Friday. The bullish move of precious metals in the previous sessions was bolstered by the softer-than-expected US inflation data in April, which triggered hope for rate cuts from the US Fed.
LINK price jumps 10% as Chainlink races toward tokenization of funds
Chainlink price has remained range-bound for a while, stuck between the $16.00 roadblock to the upside and $13.08 to the downside. However, in light of recent revelations, the token may have further upside potential.
Fed speak tempers rate cut expectations
The biggest takeaway into Friday is the latest round of Fed speak. These Fed officials reiterated their stance rates should be kept restrictive for a longer period of time until there is more clear evidence inflation is heading back towards the 2% target.