USD/CHF eases from weekly high, holds above 0.9600 mark amid modest USD strength

• USD/CHF climbs to a multi-day high and draws support from a combination of factors.
• A positive risk tone undermines the safe-haven CHF and acts as a tailwind for the pair.
• Bets for aggressive Fed rate hikes revive the USD demand and contribute to the uptick.

The USD/CHF pair regains some positive traction on Thursday and touches a four-day high, though the uptick stalls just ahead of mid-0.9600s. Nevertheless, the pair manages to stick to modest intraday gains through the early European session and is currently placed around the 0.9625 area.

Signs of stability in the equity markets undermine the safe-haven Swiss franc and act as a tailwind for the USD/CHF pair. The US dollar, on the other hand, attracts fresh buying amid firming expectations for a more aggressive policy tightening by the Fed. This was seen as another factor lending some support to spot prices.

Tuesday's stronger US CPI report fueled speculations that the Fed will hike interest rates at a faster pace to tame inflation. In fact, the implied odds for a full 1% lift-off at the September FOMC meeting currently stand at 30%. This remains supportive of elevated US Treasury bond yields and continues to benefit the USD.

That said, the lack of any follow-through buying warrants caution before positioning for an extension of the stronger US consumer inflation-inspired recovery from a nearly one-month low. Nevertheless, the fundamental backdrop suggests that the path of least resistance is to the upside and seems tilted in favour of bullish traders.

Market participants now look forward to the US economic docket, featuring Retail Sales figures, Weekly Initial Jobless Claims, Regional Manufacturing Indices, and Industrial Production data. This, along with the US bond yields, will influence the USD. Apart from this, the broader risk sentiment should provide some impetus to the USD/CHF pair.

Technical levels to watch