USD/CHF clings to gains near 0.9970 zone, lacks follow-through amid risk-off

• A goodish pickup in the USD demand assisted USD/CHF to regain positive traction on Wednesday.
• Aggressive Fed rate hike bets, rising US bond yields acted as a tailwind for the buck and the pair.
• A weaker risk tone underpinned the safe-haven CHF and kept a lid on any meaningful upside.

The USD/CHF pair attracted fresh buying on Wednesday and reversed a major part of the overnight slide to a four-day low. The pair maintained its bid tone heading into the North American session and was last seen trading around the 0.9970-0.9965 region, just a few pips below the daily high.

Fed Chair Jerome Powell struck a more hawkish tone on Tuesday and reaffirmed market bets for a more aggressive policy tightening by the Fed. Speaking at a Wall Street Journal event, Powell reiterated that he will back interest rate increases until prices start falling back toward a healthy level. This, in turn, pushed the yield on the benchmark 10-year US government bond closer to the 3.0% threshold, which helped revive the US dollar demand and assisted the USD/CHF pair to regain positive traction.

That said, a fresh leg down in the equity markets drove some haven flows towards the Swiss franc and held back bulls from placing aggressive bets. Concerns that the Russia-Ukraine war and the latest COVID-19 lockdowns in China would hit the global economic growth continued weighing on investors' sentiment. This makes it prudent to wait for strong follow-through buying before confirming that the recent pullback from a two-year high has run its course and placing fresh bullish bets.

Next on tap is the US housing market data - Building Permits and Housing Starts. Apart from this, the US bond yields will influence the USD price dynamics and provide some impetus to the USD/CHF pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities.

Technical levels to watch