USD/CHF off multi-month lows, still in the red around 0.8960-55 ahead of US data

The USD/CHF pair maintained its offered tone through the mid-European session, albeit has managed to rebound around 30 pips from over three-month lows touched earlier this Tuesday. The pair was last seen trading near the 0.8960 region, still down nearly 0.15% for the day.

The pair came under some renewed selling pressure on Tuesday and finally broke down of its two-day-old consolidative trading range amid the prevalent bearish sentiment surrounding the US dollar. The ongoing downfall in the US Treasury bond yields dragged the USD Index to the lowest level since January. This, in turn, was seen as a key factor that exerted some downward pressure on the USD/CHF pair.

Comments by various FOMC officials eased market fears that rising inflation would prompt the Fed to tighten monetary policy sooner than anticipated. In fact, Fed Governor Lael Brainard, Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard reiterated that the recent pickup in inflation would be transitory. The reassurance dragged the US bond yields lower for the fourth straight day.

Meanwhile, the USD/CHF pair dropped to the lowest level since February 19, though the prevalent risk-on mood undermined the safe-haven Swiss franc and helped limit any further losses. That said, any meaningful recovery still seems elusive, warranting some caution before confirming that the pair has bottomed out in the near term or positioning for any meaningful recovery move ahead of a duo of US macro data.

The US economic docket highlights the release of the Conference Board's Consumer Confidence Index, New Home Sales figures and Richmond Manufacturing Index. This, along with the US bond yields, will play a key role in influencing the USD price dynamics. Traders might further take cues from the broader market risk sentiment and a scheduled speech by the Fed Governor Randal Quarlesto grab some short-term opportunities.

Technical levels to watch