Market news

12 October 2021

USD/CHF remains confined in a one-week-old trading range, above mid-0.9200s

  • USD/CHF attracted some dip-buying near 0.9255 area, though lacked follow-through.
  • A recovery in equity markets undermined the safe-haven CHF and remained supportive.
  • A subdued USD demand held bulls from placing aggressive bets and capped the upside.

The USD/CHF pair reversed an intraday dip to the 0.9255 area and was last seen hovering near the top end of its daily trading range, around the 0.9270-75 region.

A goodish rebound in the US equity futures undermined the safe-haven Swiss franc and was seen as a key factor that acted as a tailwind for the USD/CHF pair. However, a subdued US dollar demand held bulls from placing aggressive bets and kept a lid on any meaningful gains for the major, at least for the time being.

A softer tone surrounding the US Treasury bond yields failed to assist the USD to capitalize on the previous day's positive move back closer to one-year tops. That said, prospects for an early policy tightening by the Fed should assist the greenback to attract some dip-buying and lend some support to the USD/CHF pair.

Despite Friday's weaker headline NFP print, investors seem convinced that the Fed remains on track to begin tapering its bond purchases by the end of 2021. The markets have also started pricing in the possibility of an interest rate hike in 2022 amid worries that the recent surge in oil/energy prices will stoke inflation.

Hence, the market focus now shifts to the release of the US consumer inflation figures on Wednesday, which will be followed by the FOMC meeting minutes. Apart from this, the US monthly Retail Sales figures, due on Friday, will influence the USD price dynamics and provide a fresh directional impetus to the USD/CHF pair.

In the meantime, traders might take cues from Tuesday's release of JOLTS Job Openings data for some impetus later during the early North American session. This, along with a scheduled speech by Fed Governor Richard Clarida and the broader market risk sentiment, might produce short-term trading opportunities around the USD/CHF pair.

From a technical perspective, the pair has been oscillating in a familiar/narrow trading band over the past one week or so. This constitutes the formation of a rectangle on short-term charts and points to indecision amid traders over the USD/CHF pair's near-term trajectory. This, in turn, warrants some caution before placing aggressive bets.

Technical levels to watch

 

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