USD/CHF remains confined in a familiar trading range around mid-0.9200s

  • USD/CHF lacked any firm directional bias and extended its sideways price moves on Tuesday.
  • A turnaround in the risk sentiment undermined the safe-haven CHF and extended some support.
  • The upside remains capped amid modest USD weakness, though the fundamental favour bulls.

The USD/CHF pair seesawed between tepid gains/minor losses through the mid-European session and was last seen trading in the neutral territory, just below mid-0.9200s.

The pair continued with its struggle to gain any meaningful traction and remained confined in a familiar trading range held over the past one week or so. The USD/CHF pair did get a minor lift during the second half of the trading on Tuesday, though the uptick lacked follow-through buying and ran out of steam near the 0.9270 region.

Fears about a full-blown conflict between Russia and the West over Ukraine receded after the former reportedly said that they are pulling back military troops as some drills have been completed. The headlines led to a dramatic turnaround in the global risk sentiment and undermined traditional safe-haven currencies, including the Swiss franc.

Bulls, however, failed to capitalize on the uptick amid modest US dollar weakness. That said, bets for a faster policy tightening by the Fed, along with the risk-on impulse triggered a fresh leg up in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond shot above the 2% mark and should limit the USD losses.

The fundamental backdrop supports prospects for the emergence of some buying around the USD/CHF pair, though the price action warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for sustained strength beyond the 0.9270 region before traders start positioning for any meaningful appreciating move.

Next on tap will be the release of the US Producer Price Index (PPI) for January, due later during the early North American session. This, along with the US bond yields, should influence the USD price dynamics. Apart from this, the broader market risk sentiment could produce some short-term trading opportunities around the USD/CHF pair.

Technical levels to watch

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