USD/CHF clings to gains near two-week top, just below mid-0.9700s amid modest USD strength

• USD/CHF shot to over a two-week high on Tuesday amid sustained USD buying.
• The recent surge in the US bond yields continued acting as a tailwind for the buck.
• A softer risk tone could underpin the safe-haven CHF and cap gains for the major.

The USD/CHF pair gained positive traction for the third successive day and climbed to over a two-week high during the first half of trading action on Tuesday. The pair maintained its bid tone through the early European session and was last seen hovering around the 0.9735-0.9740 region.

Investors remain concerned that the global supply chain disruption caused by the Russia-Ukraine war would continue to push consumer prices higher and force the Fed to tighten its monetary policy at a faster pace. This, in turn, pushed the yield on the benchmark 10-year US government bond back above the 3.0% threshold, which, in turn, offered some support to the US dollar and acted as a tailwind for the USD/CHF pair.

That said, a softer risk tone could underpin the safe-haven Swiss franc and keep a lid on any further appreciating move, at least for the time being. The market sentiment remains fragile amid worries that a more aggressive move by major central banks to constrain inflation could pose challenges to global economic growth. This warrants some caution before placing aggressive bullish bets around the USD/CHF pair.

Traders might also prefer to wait on the sidelines ahead of the crucial US consumer inflation report on Friday, which might influence the Fed's policy tightening path and the USD price dynamics. In the meantime, the US bond yields would drive the USD demand and provide some impetus to the USD/CHF pair. Apart from this, traders will take cues from the broader market risk sentiment in the absence of any top-tier US economic data.

Technical levels to watch