- USD/CHF regained positive traction on Monday and shot to a fresh two-year high.
- A softer risk tone underpinned the safe-haven CHF and capped amid weaker USD.
- Sliding US bond yields, disappointing US macro data exerted pressure on the buck.
The USD/CHF pair retreated a few pips from a two-year peak touched during the early North American session and was last seen trading around the 1.0050 area, still up nearly 0.20% for the day.
Following Friday's brief pause, the USD/CHF pair attracted fresh buying on the first day of a new week and is now looking to build on its upward trajectory witnessed over the past one-and-half months or so. That said, a combination of factors held back bulls from placing aggressive bets and kept a lid on any meaningful upside for spot prices.
Investors remain worried that a more aggressive move by major central banks to constrain inflation could hit global economic growth amid the war in Ukraine and China's zero-COVID-19 policy. The concerns were further fueled by weaker Chinese macro data, which weighed on investors' sentiment and extended some support to the safe-haven Swiss franc.
Conversely, the US dollar was pressured by a softer tone around the US Treasury bond yields. This was seen as another factor that acted as a headwind for the USD/CHF pair. The USD remained on the defensive following the disappointing release of the Empire State Manufacturing Index, which indicated worsening conditions and unexpectedly plunged to -11.6 in May.
That said, expectations that the Fed will tighten its monetary policy at a faster pace to curb soaring inflation should help limit losses for the buck and lend support to the USD/CHF pair. The fundamental backdrop favours bullish traders, suggesting that any meaningful pullback might be seen as a buying opportunity and remain limited, at least for now.
The market focus now shifts to the release of the US Retail Sales figures on Tuesday. Investors will also scrutinize remarks by several FOMC officials, including Fed Chair Jerome Powell, for clues about the possibility of a 75 bps rate hike. This would influence the USD price dynamics and determine the next leg of a directional move for the USD/CHF pair.
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 stays near 1.0850 after US housing data
EUR/USD trades in negative territory at around 1.0850 in the early American session on Tuesday. The US Dollar preserves its strength following the upbeat housing data and makes it difficult for the pair to gain traction. The two-day Fed meeting goes underway on Tuesday.
GBP/USD recovers modestly from two-week lows, trades near 1.2700
GBP/USD staged a modest rebound after touching its lowest level in two weeks below 1.2700 on Tuesday. The cautious market mood helps the US Dollar hold its ground and limits the pair's upside as markets gear up for the Fed and the BoE policy meetings.
Gold stays in daily range near $2,160
Gold fluctuates in a narrow band at around $2,160 for the second consecutive day on Tuesday. Ahead of the Fed's policy announcements, the benchmark 10-year US Treasury bond yield moves sideways near 4.3% and limits's XAU/USD's volatility.
Why is the crypto market crashing?
The two most important contribution to the ongoing bull market is the meteoric rise in Bitcoin due to the ETF approval and the sudden interest spike in Solana ecosystem. But the recent move suggests that the upward momentum is dissipating and a correction looms.
Shocker, Yen weakens after BoJ hike
The Bank of Japan (BoJ) scrapped its negative rate policy, raised the rates from -0.10% to 0%, ditched its YCC policy and ended the purchases of ETF and Japanese real estate investment trusts.