USD/CHF justifies safe-haven allure as sellers approach 0.9600 ahead of Fed meeting

• USD/CHF remains pressured after recalling the bears the previous day.
• Market sentiment deteriorates amid recession fears, pre-Fed anxiety.
• Fed is expected to announce 75 bps rate hike, Powell’s speech will be important.
• Swiss ZEW Survey data, US Durable Goods Orders are additional catalysts to watch for fresh impulse.

USD/CHF remains on the back foot around 0.9625-20 during Tuesday’s Asian session, following the seller’s re-entry from 0.9667 the previous day. Despite the broad US dollar strength, the pair manages to stay heavy due to the Swiss Franc’s (CHF) safe-haven nature.

The US dollar cheered the risk-off mood on Tuesday, after a dismal start to the week, as the market’s fears of economic slowdown joined the cautious mood ahead of the Federal Open Market Committee (FOMC) meeting.

The fears of economic slowdown intensified after the International Monetary Fund (IMF) cut its global growth forecast (once again) this year, to 2.9% from 3.6% forecasted in April. The Washington-based organization also raised concerns over more economic hardships amid a full cut-off of Russian gas to Europe and a 30% drop in Russian oil exports, both of which are looming. It should be noted that the disappointing results from the global retailer Walmart also contributed to the recession fears.

Elsewhere, the US CB Consumer Confidence fell for a third consecutive month in July, to 95.7 from 98.4 prior. Further, the US New Home Sales dropped to 0.59M for June versus 0.66M expected and 0.642M previous readout. On the same line, Richmond Fed Manufacturing Index rose to the highest level since April, to 0 from -13 expected and -9 prior (revised up from -11).

It should be noted that worsening US-China relation, recently over the South China Sea issue, also pushes US President Joe Biden to arrange a virtual meeting with his Chinese counterpart Xi Jinping, on Thursday. The same adds strength to the risk-off mood.

While portraying the mood, Wall Street closed in the red and the US Treasury yields remain mostly pressured. However, the difference between the 2-year and the 10-year bond coupons widened the most since the year 2000 and highlighted the rush towards risk-safety.

Looking forward, Switzerland’s ZEW Survey – Expectations for July, expected -81.6 versus -72.7 prior, will precede the US Durable Goods Orders for June, -0.4% forecast compared to 0.8% prior, to entertain USD/CHF traders. However, major attention will be given to the Fed’s ability to tame the inflation woes and also avoid the recession.

The US central bank is expected to announce 75 basis points (bps) of a rate hike but some of the traders also highlight the case for the 100 bps move, making the event more interesting.

Also read: Fed Preview: Powell to reignite dollar rally with promise to crush inflation, whatever the cost

Technical analysis

The 100-DMA and an upward sloping trend line from March 31, respectively around 0.9610 and 0.9590, appear tough nuts to crack for the USD/CHF bears. Recovery moves, however, need validation from a convergence of the 21-DMA and the 50-DMA, near 0.9700 by the press time.

That said, USD/CHF bears keep reins amid downbeat MACD signals and mostly steady RSI (14).