USD/CHF dives to four-day low, bears flirt with 0.9200 mark amid broad-based USD weakness

• USD/CHF witnessed heavy selling on Tuesday and moved away from an over two-month high.
• The ongoing slide in the US bond yields weighed on the USD and exerted downward pressure.
• Geopolitical tensions benefitted the safe-haven CHF and further contributed to the selling bias. 

The USD/CHF pair dived to a four-day low heading into the North American session, with bears awaiting sustained break below the 0.9200 round-figure mark.

The pair extended the previous day's sharp retracement slide from the 0.9340 area, or the highest level since November 26 and witnessed heavy follow-through selling on Tuesday. This also marked the third successive day of a negative move for the USD/CHF pair and was sponsored by a broad-based US dollar weakness.

A further decline in the US Treasury bond yields dragged the USD further away from the highest level since July 2020, touched in reaction to a more hawkish FOMC last week. Apart from this, the conflict between Russia and the West over Ukraine benefitted the safe-haven Swiss franc and contributed to the USD/CHF pair's slide.

With Tuesday's steep fall, the pair has now retreated over 150 pips from the overnight swing high. Some follow-through selling below the 0.9200 mark will be seen as a fresh trigger for bearish traders and suggest that the recent bounce from the 0.9100 neighbourhood has run out of steam, setting the stage for additional losses.

That said, the prospects for a faster policy tightening by the Fed should help limit any deeper losses for the greenback, warranting caution for bearish traders. Investors have been speculating a more aggressive policy response by the Fed to contain stubbornly high inflation and expect that the first hike in March could be 50 bps.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI. This, along with the US bond yields, should influence the USD and provide some impetus to the USD/CHF pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.

Technical levels to watch