USD/CHF jumps to fresh multi-week high, closer to mid-0.9800s ahead of US CPI

• USD/CHF scaled higher for the sixth straight day and shot to over a three-week high on Friday.
• Elevated US Treasury bond yields continued underpinning the USD and remained supportive.
• A softer risk tone could drive haven flows towards the CHF and keep a lid on any further gains.
• The market focus will remain glued to the release of the US consumer inflation figures for May.

The USD/CHF pair attracted some dip-buying near the 0.9765 region on Friday and turned positive for the sixth successive day. The momentum pushed spot prices to over a three-week high, around the 0.9840 region heading into the North American session.

The US dollar quickly reversed modest intraday losses and shot to its highest level since May 19 amid a fresh leg up in the shorter-dated US bond yields. In fact, the 2-year Treasury note rose to the highest level since November 2018 amid expectations that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation.

Hence, the market focus would remain glued to the release of the crucial US CPI report, due in a short while from now, which is expected to show that the headline inflation held steady at the 8.3% YoY rate in May. Meanwhile, core inflation, which excludes food and energy prices, is projected to edge down to 5.9% YoY versus 6.2% in April.

Investors, however, remain concerned that the global supply chain disruption caused by the Russia-Ukraine war and COVID-19 restriction in China would push consumer prices even higher. This, in turn, points to the risk of stronger print, which would be enough to boost the USD and set the stage for additional gains for the USD/CHF pair.

That said, the worsening global economic outlook continued weighing on investors' sentiment and led to a further decline in the equity markets. This could drive some haven flows towards the Swiss franc and cap gains for the USD/CHF pair. Nevertheless, the fundamental backdrop favours bullish traders and supports prospects for an extension of the ongoing move up.

Technical levels to watch