USD/CHF sticks to modest gains near one-month high, just below mid-0.9400s

• USD/CHF gained traction for the fifth successive day amid sustained USD buying.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the greenback.
• The risk-off mood extended support to the safe-haven CHF and capped the upside.

The USD/CHF pair maintained its bid tone through the first half of the European session and was last seen trading near a one-month high, just below mid-0.9400s.

The pair built on last week's breakout momentum through the 0.7370-0.7375 horizontal resistance and gained traction for the fifth successive day on Monday. The momentum pushed spot prices back closer to the YTD peak touched in March and was sponsored by sustained US dollar buying interest.

The greenback held steady near its highest level since April 2020 and continued drawing support from expectations for a more aggressive policy tightening by the Fed. The markets seem convinced that the US central bank would hike interest rates at a faster pace to combat stubbornly high inflation.

The bets were reaffirmed by New York Fed President John Williams's hawkish remarks on Thursday, which was seen as a further sign that even more cautious policymakers are on board for bigger rate hikes. This, along with elevated US Treasury bond yields, acted as a tailwind for the greenback.

Investors also seem worried that a protracted Russia-Ukraine war-led rise in commodity prices would put upward pressure on the already high inflation. Apart from this, hawkish Fed expectations pushed the US bond yields to a fresh multi-year peak, which offered additional support to the buck.

That said, the prevalent risk-off mood - as depicted by a generally weaker tone around the equity markets - drove some haven flows towards the Swiss franc and acted as a headwind for the USD/CHF pair. Moreover, holiday-thinned liquidity held back traders from placing aggressive bets.

Nevertheless, the bias remains tilted firmly in favour of bulls and supports prospects for a further near-term appreciating move for the USD/CHF pair. Some follow-through buying beyond the previous swing high, around the 0.9460 region, will add credence to the near-term positive outlook.

Technical levels to watch