USD/CHF sticks to gains near YTD top, just above mid-0.9300s amid positive risk tone

  • A combination of factors pushed USD/CHF to a fresh YTD high on Monday.
  • Signs of stability in the financial markets undermined the safe-haven CHF.
  • Elevated US bond yields benefitted the USD and further extended support.

The USD/CHF pair maintained its bid tone through the early European session and was last seen trading just above mid-0.9300s, or the highest level since November 2021.

The pair built on Friday’s bullish breakout momentum through the 0.9300 mark and gained follow-through traction for the third successive day on Monday. This also marked the fifth day of a positive move in the previous six and was sponsored by a combination of factors. Signs of stability in the financial markets undermined the safe-haven Swiss franc and acted as a tailwind for the USD/CHF pair amid modest US dollar strength.

Investors turned optimistic amid fresh hopes for a diplomatic solution to end the war in Ukraine. In fact, Ukrainian negotiator Mykhailo Podolyak said that Russia is beginning to talk constructively, and we will achieve some results in a matter of days. Moreover, a Russian delegate to the talks, Leonid Slutsky noted that they had made significant progress and the delegations could soon reach draft agreements.

On the other hand, the USD drew support from elevated US Treasury bond yields and stood tall near the YTD high touched last week. The recent monster gains in commodity prices have been fueling concerns about a major inflationary shock, which reinforced bets for an imminent start of the policy tightening by the Fed and pushed the US bond yields higher. This was seen as another factor that extended some support to the USD/CHF pair.

The momentum pushed spot prices further beyond the previous YTD high and might have triggered some short-term trading stops. Hence, the uptick could further be attributed to some technical buying, though bulls seemed reluctant to place aggressive bets. Investors preferred to wait for fresh developments surrounding the Russia-Ukraine saga and ahead of a two-day FOMC monetary policy meeting, starting this Thursday.

Technical levels to watch

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