USD/CHF remains on the defensive below mid-0.9000s, Fed decision awaited

The USD/CHF pair lacks any firm intraday directional bias on Wednesday and oscillates in a narrow trading band, just below mid-0.9000s through the Asian session.

The US Dollar (USD) remains on the defensive just above its lowest level since May 17 touched on Tuesday and is seen as a key factor acting as a headwind for the USD/CHF pair. The latest US consumer inflation figures released on Tuesday reaffirmed bets that the Federal Reserve (Fed) will skip hiking interest rates at the end of a two-day policy meeting later this Wednesday and continues to undermine the Greenback.

The US Labor Department reported that the headline CPI barely rose in May and the yearly rate decelerated from 4.9% to 4.0% - the smallest increase since March 2021. The year-on-year inflation rate, however, was still twice the Fed's 2% target and supports prospects for further policy tightening. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the July FOMC monetary policy meeting.

The expectations remain supportive of elevated US Treasury bond yields, which, in turn, is seen lending some support to the buck and the USD/CHF pair. Any meaningful recovery, meanwhile, still seems elusive in the wake of a corrective decline in the US equity futures, which tends to benefit the safe-haven Swiss Franc (CHF). This further contributes to the subdued/range-bound price action through the first half of trading on Wednesday.

Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the highly-anticipated FOMC policy decision. Apart from this, the focus will be on Fed Chair Jerome Powell's comments at the post-meeting press conference. Market participants will look for fresh cues about the Fed's rate-hike path, which will play a key role in influencing the USD price dynamics and provide a fresh impetus to the USD/CHF pair.

Technical levels to watch