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  • USD/CHF witnessed a subdued/range-bound price action on the first day of a new trading week.
  • The risk-off mood underpinned the safe-haven CHF and capped any meaningful gains for the pair.
  • Sliding US bond yields kept the USD bulls on the defensive; the hawkish Fed helped limit losses.

The USD/CHF pair now seems to have entered a bullish consolidation phase and oscillated in a range through the early European session. The pair was last seen trading around the 0.9210-15 region, just below two-month tops.

A combination of diverging forces failed to assist the USD/CHF pair to capitalize on last week’s hawkish FOMC-inspired strong move up, instead led to range-bound price action on Monday. The prevalent risk-off mood – as depicted by a weaker trading sentiment around the global equity markets – underpinned the safe-haven Swiss franc.

On the other hand, the ongoing sharp decline in the US Treasury bond yields kept the US dollar bulls on the defensive and further collaborated towards capping the gains for the USD/CHF pair. That said, the Fed’s surprise hawkish shift continued acting as a tailwind for the greenback and should help limit any meaningful pullback for the pair.

It is worth recalling that the Fed stunned investors at the end of June policy meeting on Wednesday and brought forward its timetable for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 as against policymakers projection for no increase until 2024 in the March meeting.

Adding to this, St. Louis Fed President James Bullard said on Friday that the Fed Chairman Jerome Powell officially opened taper discussion at the last meeting. Speaking to CNBC, Bullard added that the shift toward a faster tightening of monetary policy was a natural response to stronger economic growth and a quicker than expected rise in inflationary pressures.

Meanwhile, technical indicators on short-term charts are already flashing overbought conditions. This seemed to be another factor that held traders from placing any aggressive bullish bets. Nevertheless, the fundamental backdrop supports prospects for an extension of the recent sharp bounce from multi-month lows, around the 0.8925 region touched earlier this month.

Technical levels to watch