USD/CHF pares intraday gains on weaker US data, up little around mid-0.9100s

• USD/CHF regained positive traction on Tuesday amid sustained USD buying interest.
• The ongoing sharp move up in the US bond yields acted as a tailwind for the greenback.
• Dismal US data capped gains amid risk-off, which tends to benefit the safe-haven CHF.

The USD/CHF pair held on to its intraday gains through the early North American session, albeit has retreated a few pips from the daily high and was last seen trading just above mid-0.9100s.

The pair caught some fresh bids on Tuesday and is now looking to build on last week's recovery move from sub-0.9100 levels, or the lowest level since early November. The momentum was sponsored by sustained buying interest around the US dollar, which continued drawing support from elevated US Treasury bond yields.

Investors seem convinced that the Fed would begin raising interest rates in March 2022 to combat stubbornly high inflation. The expectations were reinforced by last week's data, which showed that the headline US CPI surged to the highest level since June 1982 and core CPI registered the biggest advance since 1991.

This, in turn, pushed the yield on the benchmark 10-year US government bond to the highest level since January 2020 and underpinned the greenback. That said, an extended sell-off in the US bond markets took its toll on the global risk sentiment, which benefitted the safe-haven Swiss franc and acted as a headwind for the USD/CHF pair.

Apart from this, a slump in the US Empire State Manufacturing Index to -0.70 in January from the previous month's reading of 31.9 held back bulls from placing aggressive bets around the USD/CHF pair. Even from a technical perspective, spot prices, so far, have struggled to move back above the very important 200-day SMA.

Investors also seemed reluctant and prefered to wait on the sidelines ahead of the upcoming FOMC monetary policy meeting on January 25-26. This further makes it prudent to wait for a strong follow-through buying before confirming that last week's fall from the 0.9275-0.9280 region, or a near one-month high has run its course.

Technical levels to watch