USD/CHF refreshes multi-month peak, seems poised to appreciate further amid bullish USD

• USD/CHF climbs to a fresh multi-month peak and draws support from a combination of factors.
• Bets for more Fed rate hikes continue to push the US bond yields higher and underpin the USD.
• The SNB’s surprise pause continues to weigh on the CHF and supports prospects for further gains.

The USD/CHF pair attracts some dip-buying near the 0.9045 region on Monday and touches its highest level since June 13 during the Asian session. Spot prices currently trade around the 0.9075-0.9080 area and seem poised to build on last week’s breakout momentum through a technically significant 200-day Simple Moving Average (SMA).

The prospect for further policy tightening by the Federal Reserve (Fed) assists the US Dollar (USD) to stand tall near a six-month high, which, in turn, is seen as a key factor acting as a tailwind for the USD/CHF pair. In fact, the US central bank reiterated the longer-for-higher narrative and warned last week that still-sticky inflation was likely to attract at least one more interest rate hike by the end of this year.

Adding to this, the so-called ‘dot-lot’ suggested just two rate cuts in 2024 as compared to four projected previously. This led to an extended selloff in the US fixed-income market, pushing the yield on the rate-sensitive two-year government bond to its highest level since 2007. Furthermore, the benchmark 10-year US Treasury yield stands tall near a 16-year peak, which lends support to the buck and USD/CHF pair.

The Swiss Franc (CHF), on the other hand, continues to be weighed down by the fact that the Swiss National Bank (SNB) ended its streak of five consecutive increases last week. The SNB decided to keep its benchmark interest rate unchanged at the end of the quarterly monetary policy meeting, defying expectations for a 25 bps lift-off in the wake of sub-2% inflation readings and the recent weak economy data.

This, along with acceptance above the very important 200-day SMA, supports prospects for an extension of the USD/CHF pair’s well-established uptrend witnessed over the past two months or so. In the absence of any relevant market-moving economic releases from the US on Monday, the US bond yields will play a key role in influencing the USD price dynamics and provide some impetus to the USD/CHF pair.

Technical levels to watch