USD/CHF consolidates recent gains to the highest level since June 2020, just below 0.9600

• USD/CHF witnessed subdued/range-bound price moves through the first half of the European session.
• The risk-off mood drove some haven flows towards the CHF and kept a lid on any meaningful gains.
• Hawkish Fed expectations pushed the USD to over a two-year high and continued lending support.

The USD/CHF pair consolidated its recent strong gains to the highest level since June 2020 and seesawed between tepid gains/minor losses through the first half of the European session. The pair was last seen trading around the 0.9585 region, nearly unchanged for the day.

A combination of diverging forces failed to provide any meaningful impetus to the USD/CHF pair and led to subdued/range-bound price action on Tuesday. The prospects for a more aggressive policy tightening by the Fed pushed the US dollar to a more than two-year high and acted as a tailwind for spot prices. That said, the prevalent risk-off mood drove some haven flows towards the Swiss franc and capped the upside for the major, at least for the time being.

Investors now seem convinced that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation. In fact, the markets have been pricing in jumbo rate hikes at each of the next four FOMC meetings in May, June, July and September. The bets were reaffirmed by hawkish comments by various FOMC officials last week, including Fed Chair Jerome Powell, saying that a 50 bps rate hike will be on the table at the upcoming meeting in May.

Expectations for rapid US interest rate hikes, along with prolonged COVID-19 curbs in China, fueled concerns about a global economic slowdown. This, in turn, tempered investors' appetite for perceived riskier assets, which was evident from a generally weaker tone around the equity markets. The anti-risk flow was reinforced by a further pullback in the US Treasury bond yields, which held back bulls from placing fresh bets around the USD/CHF pair.

Hence, it will be prudent to wait for some follow-through buying and sustained strength beyond the 0.9600 mark before positioning for any further near-term appreciating move for the USD/CHF pair. Traders now look forward to the US economic docket, featuring the release of Durable Goods Orders and the Conference Board's Consumer Confidence Index. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/CHF pair.

Technical levels to watch