USD/CHF remains depressed around mid-0.8900s, 50-day SMA holds the key for bulls

The USD/CHF pair struggles to capitalize on the previous day's goodish rebound from the vicinity of the 0.8900 mark and meets with a fresh supply during the Asian session on Tuesday. Spot prices currently trade around the 0.8950 area and remain below the 50-day Simple Moving Average (SMA) immediate strong hurdle.

The Wagner group's attempted mutiny in Russia over the weekend raises concerns about political instability in the country, which, along with worries about a global economic downturn, continue to underpin the safe-haven Swiss Franc (CHF). The US Dollar (USD), on the other hand, remains on the defensive for the second successive day and turns out to be another factor exerting some pressure on the USD/CHF pair.

That said, the Federal Reserve's (Fed) hawkish outlook is holding back traders from placing aggressive bearish bets around the USD. In fact, the Fed had signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year. Adding to this, Fed Chair Jerome Powell said that the US central bank doesn't see rate cuts happening any time soon and will wait until it is confident that inflation is moving down to the 2% target.

Hence, the market focus remains glued to Powell's remarks at a panel discussion in Sintra on Wednesday, which will be followed by the release of the US Core PCE Price Index - the Fed's preferred inflation gauge on Friday. This, in turn, should play a key role in influencing expectations about the next policy move by the US central bank, which, in turn, will drive the USD demand and provide a fresh directional impetus to the USD/CHF pair.

In the meantime, traders will take cues from Tuesday's US economic docket - featuring Durable Goods Orders, the Conference Board's Consumer Confidence Index, New Home Sales and Richmond Manufacturing Index. Apart from this, the broader risk sentiment might produce short-term trading opportunities around the USD/CHF pair. Meanwhile, the recent repeated failures to find acceptance above the 50-day SMA favour bearish traders.

Technical levels to watch