The USD/CHF pair begins the new week on a lower note, but there isn’t any follow-through selling.
The major is under pressure from a modest USD pullback from a multi-month high.
Losses for the USD and the pair are limited by hawkish Fed expectations and elevated US bond yields.
The USD/CHF pair opens with a negative hole on the main day of another week, though figures out how to hold its neck over the 0.8900 imprint through the Asian meeting. Spot prices are currently hovering around the 0.8910-0.8915 range, down nearly 0.20 percent for the day, and remain dependent on the price dynamics of the US dollar (USD).
Following the new solid run-up, the USD File (DXY), which tracks the Greenback against a crate of monetary standards, pulls back from a six-month high and ends up being a key element applying some strain on the USD/CHF pair. A strong increase in demand for the Japanese Yen (JPY) as a result of Bank of Japan (BoJ) Governor Kazuo Ueda’s hawkish remarks over the weekend could be the cause of the USD decline. However, aggressive USD bearish bets might be discouraged by hawkish Federal Reserve (Fed) expectations.
Market participants have been pricing in the possibility of one more 25 bps lift-off by the end of this year and appear to be convinced that the US central bank will keep interest rates higher for a longer period of time. The Wall Street Journal report reaffirmed the bets, stating that some officials still prefer to raise rates too much because they can lower them later. Before preparing for a deeper USD/CHF corrective slide, this remains supportive of elevated US Treasury bond yields and should act as a tailwind for the buck.
Prior to this week’s key US macro releases—the most recent consumer inflation figures on Wednesday, the Producer Price Index (PPI) and Retail Sales data on Thursday—investors may also prefer to wait on the sidelines. In the meantime, a generally upbeat mood in the equity markets could hurt the Swiss franc (CHF), which serves as a safe haven, and help limit losses for the USD/CHF pair. Therefore, before confirming that spot prices have topped out near the 0.8940-0.8945 region, it will be prudent to wait for strong follow-through selling.
