USDCHF hangs near YTD low, seems vulnerable around 0.9400 amid weaker USD

• USDCHF slides back closer to the YTD low amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes, sliding US bond yields weigh on the greenback.
• A positive risk tone could undermine the safe-haven CHF and help limit the downside.

The USDCHF pair meets with a fresh supply following an early uptick to the 0.9455 region on Tuesday and slides back closer to YTD low during the early part of the European session. The pair is currently placed around the 0.9400 mark and is pressured by the heavily offered tone surrounding the US Dollar.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a fresh three-month low amid hopes for smaller rate hikes by the Federal Reserve. A surprise drop in the US consumer inflation in October fueled speculations about a less aggressive policy tightening by the US central bank. This is evident from the ongoing downfall in the US Treasury bond yields and continues to weigh on the greenback.

That said, a generally positive tone around the equity markets could undermine the safe-haven Swiss franc and help limit the downside for the USDCHF pair. This makes it prudent to wait for some follow-through selling below the 0.9370 region, or the YTD low touched in August, before positioning for any further near-term appreciating move. Nevertheless, the fundamental backdrop seems tilted firmly in favour of bearish traders.

Hence, any attempted recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Traders now look forward to the US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI). This, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand. Apart from this, the broader market risk sentiment should provide a fresh impetus to the USDCHF pair.

Technical levels to watch