USD/CHF surrenders intraday gains to 11-month peak, flat-lined below 0.9400 mark

• USD/CHF witnessed an intraday turnaround from the fresh YTD peak touched earlier this Tuesday.
• The risk-off impulse in the markets benefitted the safe-haven CHF and prompted some profit-taking.
• Retreating US bond yields undermined the USD profit-taking and contributed to the intraday decline.

The USD/CHF pair recovered a few pips from the daily low touched during the early European session and was last seen trading in the neutral territory, around the 0.9385 region.

The pair prolonged its recent strong bullish trajectory and gained some positive traction during the first half of the trading on Tuesday. The momentum pushed the USD/CHF pair to the highest level since April 2021, though bulls struggled to capitalize on the move or find acceptance above the 0.9400 round-figure mark.

The market sentiment remains fragile in the wake of the risk of a further escalation in the Russia-Ukraine conflict. Apart from this, the latest COVID-19 outbreak in China took its toll on the risk sentiment. This was evident from a fresh leg down in the equity markets, which drove haven flows towards the Swiss franc.

The flight to safety triggered a corrective slide in the US Treasury bond yields and exerted some downward pressure on the US dollar. This was seen as another factor behind the USD/CHF pair's pullback of around 40 pips. That said, hawkish Fed expectations helped limit losses for the buck and extended support to the pair.

The markets seem convinced that the recent geopolitical developments might do little to hold back the Fed from announcing an imminent start of the policy tightening cycle. Apart from this, hopes for a diplomatic solution to end the war in Ukraine supports prospects for the emergence of some dip-buying around the USD/CHF pair.

Hence, the focus will remain on the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced during the US session on Wednesday. Apart from this, investors will take cues from fresh developments surrounding the Russia-Ukraine saga. The combination of factors should help determine the near-term trajectory for the USD/CHF pair.

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