USD/CHF clings to gains amid stronger USD, lacks follow-through ahead of FOMC minutes

USD/CHF staged modest recovery from a one-month low amid resurgent USD demand.

The risk-off mood underpinned the safe-haven CHF and kept a lid on any further gains.

Investors look forward to the FOMC meeting minutes for a fresh directional impetus.

The USD/CHF pair held on to its modest gains through the early North American session and was last seen trading just a few pips below the daily high, around the 0.9620-0.9625 region.

The US dollar made a solid comeback and snapped a two-day losing streak to a nearly one-month low, which, in turn, assisted the USD/CHF pair to attract some buying on Wednesday. Repositioning trade ahead of the FOMC minutes turned out to be a key factor that prompted short-covering around the USD, which seemed unaffected by softer-than-expected US Durable Goods Orders data.

That said, the prevalent risk-off environment extended some support to the safe-haven Swiss franc and kept a lid on any meaningful upside for the USD/CHF pair. Investors remain worried that a more aggressive move by major central banks to constrain inflation, the Russia-Ukraine war and the latest COVID-19 outbreak in China would pose challenges to the global economy.

The worsening global economic outlook continued weighing on investors' sentiment, which was evident from a generally weaker tone around the equity markets. The anti-risk flow was reinforced by declining US Treasury bond yields. This might further hold back the USD bulls from placing aggressive bets and cap gains for the USD/CHF pair ahead of the key event risk.

Given that a 50 bps Fed rate hike move is fully priced in, market participants will look for clues about the possibility of a jumbo 75 bps rate hike in June. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/CHF pair.

Technical levels to watch