USD/CHF extends intraday recovery from two-week low, climbs to 0.9700 mark

• USD/CHF gains some positive traction on Wednesday and reverses a part of the overnight slide.
• A generally positive risk tone undermines the safe-haven CHF and offers support to the major.
• Elevated US bond yields help the USD to stall its corrective pullback and provide a modest lift.

The USD/CHF pair attracts some buying on Wednesday and recovers a part of the overnight heavy losses to a two-week low. Spot prices are building on the steady intraday ascent through the early European session and have climbed to a fresh daily high, around the 0.9700 mark in the last hour.

Despite receding bets for a more aggressive tightening by the Fed, investors seem convinced that the US central bank will deliver a larger rate hike later this year to tame inflation. The speculations remain supportive of elevated US Treasury bond yields and will assist the US dollar to stall its recent corrective pullback from a two-decade high.

The idea of a massive 100 bps Fed rate hike move in July gained traction following the release of red-hot US consumer inflation figures, which accelerated to a four-decade high in June. Several FOMC members, however, pushed back against market expectations and signalled last week that they will likely stick to a 75 bps rate increase.

On the other hand, a generally positive tone around the equity markets undermined the safe-haven Swiss franc and offered some support to the USD/CHF pair. The uptick, however, lacked bullish conviction, warranting caution before confirming that the downfall from the 0.9885 region, or a multi-week high touched last Thursday, has run its course.

Market participants now look forward to the release of US Existing Home Sales data later during the early North American session. Apart from this, the US bond yields should influence the USD and provide some impetus to the USD/CHF pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities.

Technical levels to watch