USD/CHF subdued in 0.9250 area despite choppiness elsewhere as Russia prepares for Ukraine assault

• USD/CHF remains subdued near 0.9250 despite choppy conditions elsewhere in FX markets/other asset classes as Russia prepares its Ukraine assault.
• Both the buck and Swiss franc are currently underpinned by a safe-haven bid, making for unpredictable trading conditions going forward.

Despite recent cross-asset choppiness after the Ukrainian President confirmed Russia will attack on Wednesday and after reports citing satellite imagery said Russian troops were now moving into attack positions, USD/CHF continues to trade in a relatively contained manner. The pair is currently flat on the day near 0.9250, having swung within thin 0.9240-70ish ranges on the first trading session of the week. The pair’s lack of notable volatility owes to the fact that both the US dollar and Swiss franc are viewed as safe-haven currencies in the context of elevated geopolitical uncertainty.

Technicians will note that the pair has in the last few days formed a pennant structure that suggests a breakout in either a bullish or bearish direction is likely. Recent upside in US bond yields amid further hawkish commentary from influential Fed policymaker James Bullard on Monday helped underpin the US dollar, safe-haven demand aside, against some of its G10 peers. Bullard’s remarks helped pump Fed tightening expectations. If economic events this week (Producer Price Inflation on Tuesday, Retail Sales and Fed minutes on Wednesday) further solidify expectations for a 50bps rate hike from the Fed in March, then that could favour an upside break.

In this instance, the immediate area of resistance to be watching is last week’s highs just under 0.9300 and then the annual highs near 0.9350 just above it. However, if war is on the brink of breaking out in Eastern Europe and associated sanctions on the Russian economy do risk causing another spike in global inflationary pressures, traders may continue to view CHF favourably. Inflation is structurally lower in Switzerland than elsewhere, as has been witnessed in the post-pandemic era. Amid a highly uncertain geopolitical backdrop, USD/CHF trading conditions will likely be unpredictable and it may be far to soon to call for a lasting breakout of the 0.9100 to upper-0.9300s range that has persisted for six months.