USD/CHF pares the biggest daily loss in a week above 0.9200 ahead of FOMC

• USD/CHF licks its wounds near one-week low, picks up bids of late.
• Cautious optimism in the market, led by banking sector headlines, keeps US Dollar buyers hopeful.
• Expectations of SNB’s dovish rate hike also favor USD/CHF bulls.

USD/CHF prints mild gains around 0.9230 as it recovers from the lowest levels in a week heading into Wednesday’s European session. In doing so, the Swiss Franc (CHF) pair consolidates the biggest daily loss in one week ahead of the all-important Federal Open Market Committee (FOMC) monetary policy meeting.

It’s worth noting that the increased optimism joined mixed headlines from Switzerland to weigh on the USD/CHF prices the previous day. However, the pre-Fed anxiety and a light calendar seem to have restricted the quote’s latest moves, allowing traders to pare earlier losses. Additionally allowing the pair to rise are the headlines suggesting the US policymakers’ discussion on ways to surpass Congress to defend the banks, as well as chatters that the First Republic Bank eyes the government’s help.

On Tuesday, market sentiment improved after US Treasury Secretary Janet Yellen said, "Treasury, Fed, FDIC actions reduced risk of further bank failures that would have imposed losses on deposit insurance fund."  Earlier on Tuesday, Bloomberg shared the news stating that the “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.”

Also important were comments from Dr. Marcel Rohner, Switzerland’s Banking Association Chairman, who said on Tuesday, “credibility in Swiss banking has not been destroyed by the Credit Suisse crisis, but the situation is not good.” Rohner also added, “The Swiss credit supply is not a problem, our banking environment is increasingly competitive.”

Talking about the data, a reduction in the Swiss trade surplus in February joined downbeat Exports and a mild improvement in Imports to suggest a foggy picture of Switzerland’s foreign trade on Tuesday. On the same line, the US Existing Home Sales for February marked a notable jump of 14.5% versus 0.0% expected and -0.7% prior. However, the Philadelphia Fed Non-Manufacturing Business Outlook survey gauge dropped to -12.8 in March and tamed the US Dollar-linked optimism afterward.

Against this backdrop, S&P 500 Futures remain lackluster around 4,040 despite upbeat Wall Street closing while benchmark US Treasury bond yields struggle to extend a two-day rebound from the lowest levels since September 2022. That said, the US 10-year and two-year Treasury bond yields mark a one basis point of downside near 3.60% and 4.18% respectively by the press time.

Moving on, USD/CHF traders should pay attention to developments in the Fed’s dot plot and comments to push back banking turmoil in Fed Chairman Jerome Powell’s speech. Following that, the Swiss National Bank’s (SNB) ability to match the 0.50% rate hike and push back banking sector woes will be crucial to watch for clear directions.

Technical analysis

A two-week-old descending resistance line, around 0.9275 by the press time, precedes the 100-DMA hurdle of 0.9345 to challenge the USD/CHF buyers. Meanwhile, multiple supports test the Swiss currency pair bears around 0.9140.