- USD/CHF gained strong positive traction and recovered a part of Friday’s slump to a two-week low.
- The risk-on flow undermined the safe-haven CHF and extended support amid renewed USD strength.
- Expectations for a shift in the Fed’s policy outlook might cap gains for the greenback and the major.
The USD/CHF pair maintained its bid tone through the early European session and climbed to a fresh daily top, around the 0.9270 region in the last hour.
A combination of factors assisted the USD/CHF pair to attract some buying on the first day of a new week and recover a part of Friday's slump to a two-week low, around the 0.9215 region. The global risk sentiment stabilized a bit as investors preferred to wait and see if the new Omicron coronavirus variant would eventually derail the economic recovery. This was evident from a goodish bounce in the equity markets, which undermined the safe-haven Swiss franc and acted as a tailwind for the USD/CHF pair.
Meanwhile, the risk-on flow was reinforced by a strong pickup in the US Treasury bond yields. This helped revive the US dollar demand and further contributed to the USD/CHF pair's move up. That said, the repricing of the likely timing of the Fed's interest rate hike move might hold back the USD bulls from placing aggressive bets and cap any meaningful upside for the major. The detection of a new vaccine-resistant coronavirus variant might have forced investors to reassess the Fed's (hawkish) policy outlook.
Hence, it will be prudent to wait for a strong follow-through buying before confirming that the corrective pullback has run its course and positioning for any further intraday appreciating move. Nevertheless, the USD/CHF pair, so far, has shown some resilience below the 50-day SMA, which should now act as a key pivotal point for short-term traders. Market participants now look forward to the US economic docket, featuring the only release of Pending Home Sales data later during the early North American session.
This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/CHF pair. The key focus, however, will remain on developments surrounding the coronavirus saga, which will play a key role in driving the broader market risk sentiment and demand for the safe-haven CHF. The combination of factors could, in turn, produce some trading opportunities around the major.
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 fluctuates in daily range above 1.0600
EUR/USD struggles to gather directional momentum and continues to fluctuate above 1.0600 on Tuesday. The modest improvement seen in risk mood limits the US Dollar's gains as investors await Fed Chairman Jerome Powell's speech.
GBP/USD stabilizes near 1.2450 ahead of Powell speech
GBP/USD holds steady at around 1.2450 after recovering from the multi-month low it touched near 1.2400 in the European morning. The USD struggles to gather strength after disappointing housing data. Market focus shifts to Fed Chairman Powell's appearance.
Gold aiming to re-conquer the $2,400 level
Gold stages a correction on Tuesday and fluctuates in negative territory near $2,370 following Monday's upsurge. The benchmark 10-year US Treasury bond yield continues to push higher above 4.6% and makes it difficult for XAU/USD to gain traction.
XRP struggles below $0.50 resistance as SEC vs. Ripple lawsuit likely to enter final pretrial conference
XRP is struggling with resistance at $0.50 as Ripple and the US Securities and Exchange Commission (SEC) are gearing up for the final pretrial conference on Tuesday at a New York court.
US outperformance continues
The economic divergence between the US and the rest of the world has become increasingly pronounced. The latest US inflation prints highlight that underlying inflation pressures seemingly remain stickier than in most other parts of the world.