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  • USD/CHF witnessed a modest pullback from multi-month tops amid some USD profit-taking.
  • Retreating US bond yields seemed to be the only factor exerting pressure on the greenback.
  • The risk-on mood, upbeat US economic outlook should help limit the downside for the major.

The USD/CHF pair extended its steady intraday decent and dropped to fresh session lows, around the 0.9320-15 region in the last hour.

The pair stalled its recent strong bullish trajectory and witnessed a modest pullback from the 0.9375 region, or the highest level since July 2020 amid notable US dollar supply. Expectations that the Fed will take some action to curb the rapid rise in long-term borrowing cost triggered a modest pullback in the US Treasury bond yields. This, in turn, prompted some US dollar profit-taking and exerted pressure on the USD/CHF pair.

That said, a combination of factors could extend some support to the USD/CHF pair and help limit any deeper losses. The prospects for a relatively faster US economic recovery was reinforced by Friday’s stunning US NFP report and could attract some dip-buying around the greenback. Investors remain optimistic about the US economic outlook amid the rapid pace of COVID-19 vaccinations and the passage of a massive US fiscal spending bill.

Apart from this, the underlying bullish sentiment – as depicted by a positive tone surrounding the equity market – might hold investors from buying the safe-haven Swiss franc. This makes it prudent to wait for some strong follow-through selling before confirming that the USD/CHF pair might have topped out in the near-term and positioning for any further corrective slide.

In the absence of any major market-moving economic releases, the US bond yields will continue to play a key role in influencing the USD price dynamics. Investors will further take cues from the broader market risk sentiment, which will drive the safe-haven CHF and produce some meaningful trading opportunities around the USD/CHF pair.

Technical levels to watch