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  • USD/CHF, so far, has been struggling to register any meaningful recovery from multi-month lows.
  • An uptick in the US bond yields provided a modest lift to the USD and extended some support.
  • The risk-on mood undermined the safe-haven CHF, though did little to impress bullish traders.

The USD/CHF pair extended its sideways consolidative price action through the first half of the European session and was last seen trading around mid-0.8900s.

A combination of factors failed to assist the pair to register any meaningful recovery from over three-month lows touched in the previous session. The prevalent risk-on environment undermined demand for the safe-haven Swiss franc and acted as a tailwind for the USD/CHF pair. On the other hand, a modest bounce in the US Treasury bond yields provided a modest lift to the US dollar and remained supportive.

That said, firming expectations that the Fed will keep interest rates low for a longer period held the USD bulls from placing aggressive bets and capped the upside for the USD/CHF pair. Various FOMC officials eased worries about runaway inflation and reiterated that any spike in prices would be temporary. This, in turn, forced investors to scale down their bets for an earlier than anticipated Fed lift-off.

From a technical perspective, the USD/CHF pair’s inability to attract any buying suggests that the near-term bearish trend might still be far from being over. Hence, the range-bound price action might still be categorized as a bearish consolidation phase. This makes it prudent to wait for some strong follow-through buying before confirming that the pair has bottomed out and positioning for any meaningful upside.

There isn’t any major market-moving economic data due for release from the US on Wednesday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader market risk sentiment will influence the safe-haven CHF and contribute to produce some short-term trading opportunities around the USD/CHF pair.

Technical levels to watch