USD/CHF keeps the red below 0.9900 mark amid weaker USD, ahead of US macro data

• USD/CHF corrects from a multi-month low touched on Monday amid modest USD weakness.
• Retreating US bond yields is seen as a key factor that prompts profit-taking around the USD.
• Aggressive Fed rate hike bets should act as a tailwind for the buck and limit losses for the pair.

The USD/CHF pair comes under some selling pressure on Tuesday and erodes a major part of the overnight gains to the highest level since June 16. The pair remains on the defensive through the first half of the European session and is currently placed just below the 0.9900 mark, near the lower end of its daily range. 

The US dollar bulls took a brief pause following the recent strong runup to a two-decade high and opted to take some profits off the table amid a modest pullback in the US Treasury bond yields. This, in turn, is seen exerting some downward pressure on the USD/CHF pair, though a combination of factors should help limit any meaningful downside.

The risk-on impulse - as depicted by a positive tone around the equity markets - could undermine demand for the safe-haven Swiss franc. Furthermore, a more hawkish stance adopted by the Federal Reserve should act as a tailwind for the US bond yields, which, in turn, should offer some support to the greenback and the USD/CHF pair, at least for now.

It is worth recalling that the US central bank signalled last week that it will likely undertake more aggressive increases at its upcoming meetings to cap inflation. This supports prospects for the emergence of some dip-buying around the USD/CHF pair. Market participants now look forward to Fed Chair Jerome Powell's speech for a fresh impetus.

Apart from this, traders on Tuesday will take cues from the US economic docket - featuring Durable Goods Orders, the Conference Board's Consumer Confidence Index, New Home Sales and the Richmond Manufacturing Index. This, along with the US bond yields, will influence the USD and provide some meaningful trading impetus to the USD/CHF pair.

Technical levels to watch