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  • USD/CHF prolonged its recent downward trajectory on Monday amid sustained USD selling bias.
  • Reduced Fed rate hike bets, the recent decline in the US bond yields weighed heavily on the USD.
  • A softer risk tone benefitted the safe-haven CHF and further contributed to the ongoing downfall.

The USD/CHF pair continued losing ground through the first half of the European session and tumbled to seven-week lows, around the 0.9130 region in the last hour.

The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 0.9215 region and prolonged its recent retracement slide from nine-month tops touched on April 1. The bearish pressure surrounding the US dollar remained unabated on the first day of a new trading week. This, in turn, was seen as a key factor exerting pressure on the USD/CHF pair.

Despite the incoming strong US economic data, investors seem convinced that the Fed will keep interest rates near zero levels for a longer period. The Fed’s stubbornly dovish view that a spike in inflation is likely to be transitory forced investors to cut the bets for an earlier than anticipated Fed lift-off, which, in turn, continued undermining demand for the greenback.

The buck was further weighed down by the recent sharp decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond extended its recent sharp pullback from a 14-month peak of 1.776% touched in March and tumbled to 1.5280% last week. This was seen as another factor that further contributed to drive flows away from the USD.

Meanwhile, a slight deterioration in the global risk sentiment benefitted the safe-haven Swiss franc and exerted some additional downward pressure on the USD/CHF pair. Investors turned cautious amid renewed fears about another dangerous wave of coronavirus infections globally. This, in turn, dragged the pair further below the 200-day EMA support near the 0.9185-80 region.

Hence, the downfall could further be attributed to some technical selling, though oversold conditions on hourly charts might help limit deeper losses for the USD/CHF pair. Hence, it will be prudent to wait for some intraday consolidation or a modest bounce before positioning for any further depreciating move amid absent relevant market moving economic releases.

Technical levels to watch