USD/CHF flirts with daily low, around mid-0.9900s amid broad-based USD weakness

• USD/CHF snaps a three-day winning streak to over a one-week high amid modest USD weakness.
• Expectations for another 75 bps Fed rate hike should limit the USD losses and lend some support.
• A positive risk tone could undermine the safe-haven CHF and warrants caution for bearish traders.

The USD/CHF pair comes under some selling pressure on Tuesday and snaps a three-day winning streak to over a one-week high touched the previous day. The pair maintains its offered tone through the early part of the European session and is currently flirting with the daily low, around mid-0.9900s.

The US dollar struggles to capitalize on its gains recorded over the past three trading sessions amid speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, stalls its recent bounce from over a one-month low. This, in turn, is seen as a key factor exerting downward pressure on the USD/CHF pair.

The downside for the greenback, however, seems limited amid firming expectations for another supersized 75 bps Fed rate hike at the end of a two-day policy meeting on Wednesday. Apart from this, a goodish recovery in the global risk sentiment seems to undermine the safe-haven Swiss franc. The combination of the aforementioned factors should lend some support to the USD/CHF pair, warranting some caution before placing fresh bearish bets.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI later during the early North American session. The data might influence the USD, which, along with the broader risk sentiment, should provide some impetus. The focus, however, will remain on the highly-anticipated FOMC policy decision, which will help determine the near-term trajectory for the buck and the USD/CHF pair.

Technical levels to watch