USD/CHF climbs back above mid-0.9100s amid modest USD strength, positive risk tone

• USD/CHF reverses an intraday dip and turns positive for the second successive day on Wednesday.
• A further rise in the US bond yields lends support to the USD and remains supportive of the uptick.
• Signs of stability in the equity markets undermine the safe-haven CHF and further act as a tailwind.

The USD/CHF pair attracts fresh buying following an early dip to the 0.9115 area and turns positive for the second successive day on Wednesday. The pair climbs back above mid-0.9100s during the early European session and looks to build on its recovery from a six-week low touched on Monday.

A further rise in the US Treasury bond yields lends some support to the US Dollar, which, in turn, is seen acting as a tailwind for the USD/CHF pair. Despite uncertainties over the US banking system, investors seem convinced that the Federal Reserve might still go ahead with a smaller 25 bps rate hike at its next policy meeting on March 21-22. The bets were lifted by the US consumer inflation figures released on Tuesday and continue to push the US bond yields higher.

Furthermore, signs of stability in the financial markets seem to undermine the safe-haven Swiss Franc (CHF) and turn out to be another factor offering support to the USD/CHF pair. Investors piled back into stocks, which led to the overnight relief rally on Wall Street, amid easing fears about a broader systemic crisis from the sudden collapse of Silicon Valley Bank (SVB). The spillover effect remains supportive of a generally positive tone around the equity markets.

The aforementioned fundamental backdrop favours the USD bulls and supports prospects for some meaningful appreciating move for the USD/CHF pair. Market participants now look to the US economic docket, featuring the release of the Producer Price Index (PPI), monthly Retail Sales figures and the Empire State Manufacturing Index later during the early North American session. Apart from this, the US bond yields might influence the USD price dynamics.

Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the USD/CHF pair. The market focus, however, will remain glued to a two-day FOMC monetary policy meeting, starting next Tuesday, which will drive the USD in the near term and determine the next leg of a directional move for the major. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out.

Technical levels to watch