USD/CHF remains on the defensive, around 0.9270-75 area

• USD/CHF quickly reversed an intraday dip to levels below mid-0.9200s.
• Retreating US bond yields weighed on the USD and capped the upside.
• Hawkish Fed expectations should limit the USD losses and favours bulls.

The USD/CHF pair struggled to capitalize on its intraday bounce from a two-day through and remained on the defensive around the 0.9270-75 region through the first half of the European session.

The pair extended the overnight retracement slide from the 0.9330 area, or the highest level since October 1 and witnessed some selling during the early part of the trading action on Thursday. Retreating US Treasury bond yields dragged the US dollar away from a 16-month peak touched in the previous session, which, in turn, exerted some pressure on the USD/CHF pair.

That said, a combination of factors helped limit any meaningful downfall, rather assisted the pair to quickly reverse a dip below mid-0.9200s. Stable performance around the equity markets undermined the safe-haven Swiss franc and extended some support to the USD/CHF pair. Apart from this, hawkish Fed expectations acted as a tailwind for the greenback and further helped limit losses.

In fact, the markets have started pricing in the possibility for an eventual rate hike move by July 2022. Moreover, the Fed funds futures indicate a high likelihood of another raise by November amid worries about the continuous rise in inflationary pressures. This, in turn, supports prospects for the emergence of some USD dip-buying and a further appreciating move for the USD/CHF pair.

Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. Apart from this, the US bond yields and a scheduled speech by New York Fed President John Williams will influence the USD and provide a fresh impetus to the USD/CHF pair later during the early North American session.

Technical levels to watch