USD/CHF climbs to four-week peak, just above mid-0.9200s

• USD/CHF gained some follow-through traction on Tuesday and shot to multi-week highs.
• Hawkish Fed expectations continued underpinning the USD and remained supportive.
• Sliding US bond yields, the cautious mood might cap gains ahead of the US Retail Sales.

The USD/CHF pair reversed an intraday dip to the 0.9235 region and shot to over four-week highs during the early European session, though lacked follow-through.

The pair attracted some dip-buying on Tuesday and is now looking to build on last week's hotter-than-expected US CPI-inspired rally from the 0.9100 round-figure mark. The uptick was exclusively sponsored by the underlying bullish sentiment surrounding the US dollar, bolstered by the prospects for an early policy tightening by the Fed.

The USD stood tall near 16-month tops amid growing market acceptance that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. It is worth recalling that data released last Wednesday showed that the US consumer prices in October rose at the fastest pace since 1990.

In fact, the markets have been pricing in the possibility for an eventual Fed rate hike move by July 2022 and the Fed funds futures indicate a high likelihood of another raise by November. That said, retreating US Treasury bond yields held the USD bulls from placing fresh bets and kept a lid on any further gains for the USD/CHF pair.

Meanwhile, the cautious market mood – as depicted by a generally softer tone around the equity markets – extended some support to the safe-haven Swiss franc. This was seen as another factor that further collaborated to cap the upside for the USD/CHF pair. Investors also preferred to wait on the sidelines ahead of the US Retail Sales figures.

The key US macro data is scheduled for release later during the early North American session. This, along with the US bond yields and speeches by a slew of FOMC members, might influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/CHF pair.

Technical levels to watch