USD/CHF flirts with weekly high, bulls await a sustained move beyond 0.9200 mark

• USD/CHF gained strong positive traction on Thursday amid broad-based USD strength.
• The Fed's hawkish outlook pushed the US bond yields higher and underpinned the USD.
• The risk-off impulse extended some support to the safe-haven CHF and capped gains.

The USD/CHF pair climbed to the top end of its weekly trading range during the early European session, though continued with its struggle to break through the 0.9200 mark.

Following the previous day's good two-way price moves, the USD/CHF pair caught some fresh bids on Thursday and seems all set to build on this week's solid bounce from the 0.9100 mark. The US dollar drew support from surprisingly hawkish FOMC meeting minutes, which, in turn, was seen as a key factor that provided a goodish lift to the USD/CHF pair.

The December 14-15 FOMC monetary policy meeting minutes indicated that the US central bank could hike interest rates sooner-than-expected to combat high inflation. The markets were quick to react and are now pricing in an 80% chance of an eventual liftoff in March. This, in turn, continued pushing the US Treasury bond yields higher and underpinned the buck.

In fact, the US 2-year notes, which are sensitive to rate hike expectations along with 5-year notes, jumped to a near two-year high. Moreover, the yield on the benchmark 10-year US government bond shot to the highest level since October. This, to a larger extent, helped offset the risk-off impulse, which tends to benefit the safe-haven Swiss franc.

An extended selloff in the US bond markets, along with worries about the rapid spread of the Omicron variant took its toll on the global risk sentiment. This was evident from the prevalent cautious mood around the equity markets. This, however, did little to hinder the intraday move up, albeit seemed to be the only factor that capped gains for the USD/CHF pair.

Meanwhile, the fundamental backdrop favour bullish traders and support prospects for additional gains. That said, it will still be prudent to wait for a sustained strength beyond the 0.9200 mark before positioning for a further appreciating move. The USD/CHF pair might then accelerate the momentum towards the next relevant hurdle near mid-0.9100s.

Market participants now look forward to the US economic docket, highlighting the releases of the usual Weekly Initial Jobless Claims and ISM Services PMI. This, along with the US bond yields, should influence the USD price dynamics. Apart from this, the broader market risk sentiment might produce some trading opportunities around the USD/CHF pair.

Technical level to watch