- The cautious mood benefitted the safe-haven CHF and exerted some pressure on USD/CHF.
- Sliding US bond yields kept the USD bulls on the defensive and contributed to the selling bias.
- The downside is likely to remain limited ahead of Thursday’s key release of the US CPI report.
The USD/CHF pair edged lower through the first half of the European session and dropped back closer to mid-0.8900s, or one-week lows touched in the previous session.
A combination of factors prompted some fresh selling around the USD/CHF pair on Wednesday, with bears now looking to extend the NFP-inspired retracement slide from multi-week lows. The prevalent cautious mood extended some support to the safe-haven Swiss franc and was seen as a key factor that exerted some pressure on the major.
On the other hand, the US dollar was pressured by the ongoing decline in the US Treasury bond yields. That said, concerns that rising inflationary pressure might force the Fed to taper its asset purchases sooner rather than later acted as a tailwind for the USD. This, in turn, should help limit any further losses for the USD/CHF pair.
Hence, the market focus will remain glued to Thursday's release of the latest US consumer inflation figures. This will be another piece of the macro data that would set the tone for the FOMC meeting on June 15-16. Heading into the key data risk, investors' reluctance to place aggressive bets might also lend some support to the USD/CHF pair.
In the meantime, the US bond yields will play a key role in influencing the USD price dynamics amid absent relevant market-moving economic releases on Wednesday. Apart from this, the broader market risk sentiment might provide some meaningful impetus to the USD/CHF pair and allow traders to grab some short-term opportunities.
Technical levels to watch
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