USD/CHF retakes 0.9300 mark amid modest USD strength, risk-off mood likely to cap gains

• USD/CHF fills a modest bearish gap opening on Monday, though the upside potential seems limited.
• The emergence of some USD buying is seen as the only factor lending some support to the major.
• Bets for a less hawkish Fed, tumbling US bond yields and the risk-off mood to cap gains for the pair.

The USD/CHF pair attracts some buyers following a modest bearish gap opening to the 0.9245 area on Monday and climbs to a fresh daily high during the early European session. The pair, for now, seems to have snapped a two-day losing streak and looks to build on the momentum beyond the 0.9300 mark.

The US Dollar (USD) advances slightly on Monday and acts as a tailwind for the USD/CHF pair, though a combination of factors might hold back bulls from placing aggressive bets and keeps a lid on any meaningful upside. The prevalent risk-off environment is seen lending some support to the safe-haven Swiss Franc (CHF). Apart from this, diminishing odds for a more aggressive policy tightening by the Federal Reserve (Fed) further contribute to capping gains for the major, at least for the time being.

Despite the recent emergency liquidity measures and multi-billion-dollar lifelines for troubled US and European banks, concerns about the contagion risk and the possibility of a full-blown global banking crisis showed little signs of subsiding. Apart from this, looming recession risks take a toll on the global risk sentiment, which is evident from an extended sell-off across the equity markets. The anti-risk flow force investors to take refuge in traditional safe-haven currencies, including the CHF.

The recent developments, meanwhile, fuel speculations that the US central bank will soften its hawkish rhetoric to prevent any further economic pressure from high-interest rates. In fact, the markets are now pricing in a smaller 25 bps lift-off at this week's FOMC meeting, starting on Tuesday, and the Fed will cut rates during the second half of the year. This is reinforced by a further steep decline in the US Treasury bond yields, which caps gains for Greenback and the USD/CHF pair.

Traders also seem reluctant and prefer to move to the sidelines ahead of this week's key central bank event risks - the outcome of the highly-anticipated FOMC meeting on Wednesday, followed by the Swiss National (SNB) meeting on Thursday. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further intraday appreciating move for the USD/CHF pair in the absence of any relevant market-moving economic releases from the USD.

Technical levels to watch