USD/CHF hangs near its lowest level since January 2021, below 0.8900 mark

• USD/CHF drifts lower for the fourth straight day amid sustained USD selling bias.
• Expectations for an imminent Fed rate-hike pause drag the USD to a one-year low.
• Looming recession risks benefit the safe-haven CHF and contribute to the downfall.

The USD/CHF pair remains under some selling pressure for the fourth successive day on Friday and languishes near its lowest level since January 2021 touched the previous day. The pair trades just below the 0.8900 round figure during the early European session and seems vulnerable amid the underlying bearish sentiment surrounding the US Dollar (USD).

In fact, the USD Index, which tracks the Greenback against a basket of currencies, prolongs a four-day-old downtrend and drops to a one-year low amid expectations that the Federal Reserve (Fed) is nearly done with its rate-hiking cycle. The bets were lifted by the US Producer Price Index (PPI) report released on Thursday, which showed that inflation at the wholesale level cooled dramatically in March.

Against the backdrop of the softer US CPI on Wednesday, the data suggested that disinflation is progressing smoothly, which should allow the US central bank to pause its policy tightening. This, in turn, keeps the US Treasury bond yields depressed and weighs on the buck. Apart from this, a weaker risk tone benefits the safe-haven Swiss Franc (CHF) and exerts downward pressure on the USD/CHF pair.

Growing worries about a deeper global economic downturn keep a lid on the recent optimism, which is evident from a mild weakness around the equity markets. It is worth recalling that the International Monetary Fund (IMF) trimmed its 2023 global growth outlook on Tuesday, citing the impact of higher interest rates. This, in turn, boosts demand for safe-haven assets and drives some flows towards the CHF.

The aforementioned fundamental backdrop suggests that the path of least resistance for the USD/CHF pair is to the downside. That said, the Relative Strength Index (RSI) on the daily chart is flashing slightly oversold conditions and holding back traders from placing fresh bearish bets. Investors now look to the US macro data - Retail Sales figures and the Preliminary Michigan Consumer Sentiment Index - for a fresh impetus.

Technical levels to watch