- USD/CHF bulls take a breather after refreshing multi-day top.
- Firmer yields and risk-aversion joins hawkish Fed bets to propel DXY.
- SNB Chairman Jordan’s failure to convince markets of further rate hikes can propel the quote beyond 1.0050-65 key hurdle.
USD/CHF bulls flirt with the parity during the five-day uptrend early Tuesday in Europe, after rising to the highest levels since June. The Swiss currency (CHF) pair’s latest gains could be linked to the market’s rush towards the risk safety, as well as anxiety ahead of today’s speech from Swiss National Bank (SNB) Chairman Thomas Jordan.
The market’s sour sentiment take clues from the intensifying Russia-Ukraine tussles as Moscow shells Kyiv after witnessing an explosion at the Crimean bridge. On the same line are the fears surrounding China’s take on Taiwan and the US's friendship with the Asian nation. While portraying the mood, the S&P 500 Futures that drop 0.50% as bears lean towards the monthly low.
Additionally, hawkish Fedbets and firmer Treasury bond yields also portray the market’s risk-off mood and underpin the US Dollar’s strength. That said, the US Dollar Index (DXY) rises 0.18% intraday gains as it prints a five-day uptrend near 113.40. In doing so, the greenback’s gauge versus the six major currencies traces the US Treasury yields as the US 30-year Treasury yields rise to a fresh high since January 2014 whereas the 10-year counterpart pokes the 4.0% threshold. Also favoring the DXY is the CME’s FedWatch Tool which signals a 78% chance of the Fed’s 75 bps rate hike in November.
The mixed Fedspeak and the US holiday on Monday couldn’t disappoint the DXY bulls. Chicago Fed President Charles Evans said on Monday that the US can lower inflation relatively quickly without recession or a large increase in unemployment. The policymaker also added that the Fed needs to "carefully and judiciously" navigate to a "reasonably restrictive" policy rate. It should be noted that Federal Reserve Vice Chair Lael Brainard made the case for cautious rate hikes for the future, per the Wall Street Journal (WSJ).
Looking forward, USD/CHF traders will pay attention to the speech from SNB’s Jordan to confirm further rate hikes from the Swiss central bank. Should Jordan manage to convince hawks, the quote may witness a pullback. However, major attention will be given to Wednesday’s Federal Open Market Committee (FOMC) Meeting Minutes and Thursday’s US Consumer Price Index (CPI) data for September.
Technical analysis
Although the USD/CHF buyers cheer the pair’s sustained trading above the monthly support line, around 0.9875 by the press time, a five-month-long horizontal resistance area near 1.0050-65 appears a tough nut to crack for the bulls amid the nearly overbought RSI.
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