USD/CHF rebound approaches 0.9300 as banking fears recede, SNB vs. Fed play in focus

• USD/CHF grinds higher after positing the first daily gains in three.
• US policymakers’ discussion on bank deposit insurance allows markets to remain optimistic.
• Yields rebound amid hawkish Fed bets, mixed feelings about banking sector fallout.
• Swiss trade numbers, US housing data can entertain intraday traders.

USD/CHF picks up bids to refresh intraday high as it extends the previous day’s gains, the first in three, to 0.9300 during early Tuesday morning in Europe.

The Swiss Franc (CHF) pair’s latest rebound could be linked to the US Dollar’s corrective bounce off the five-month low amid hawkish Fed bets. However, cautious optimism surrounding the latest banking industry updates, following a debacle in the US and Europe.

US Dollar Index (DXY) bounces off the lowest levels since early February, marked the previous day, while snapping a three-day downtrend, mildly bid around 103.40 by the press time. In doing so, the greenback’s gauge versus the six major currencies traces the late Monday’s recovery in the US Treasury bond yields, as well as the hawkish Fed bets, to tease buyers ahead of the key Federal Open Market Committee (FOMC) Monetary Policy Meeting, up for release on Wednesday.

That said, the Treasury bond yields remain inactive but keep the previous day’s bounce off multi-day low as the US 10-year and two-year Treasury bond yields recovered from the lowest levels since September 2022 on Monday. Furthermore, CME’s FedWatch tool mentions the probability of witnessing a 0.25% Fed rate hike on Wednesday as near 75%, up from the last week’s 65%.

Alternatively, a headline from Bloomberg suggests relief for the traders amid the impending banking crisis, which in turn challenges the US Dollar’s haven demand and may test the USD/CHF upside. “US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis,” reported Bloomberg. The news quotes anonymous people with knowledge of the talks saying, “Treasury Department staff are reviewing whether federal regulators have enough emergency authority to temporarily insure deposits greater than the current $250,000 cap on most accounts without formal consent from a deeply divided Congress.”

It should be noted that the fears of the FDIC’s inability to cover the US bank deposits, due to the limitations of funds in the reserve, join the doubts surrounding the UBS-Credit Suisse deal to probe the risk-on mood amid a sluggish Asian session.

Amid these plays, S&P 500 Futures print mild gains to portray cautious optimism.

Looking ahead, February month trade numbers from Switzerland will precede the US second-tier housing data to entertain intraday USD/CHF traders. However, major attention will be given to the Fed versus Swiss National Bank (SNB) play as the latter previously advocated policy pivot.

Technical analysis

A two-week-old descending resistance line challenge USD/CHF bulls around 0.9300.