USD/CHF slides below 0.8900 mark amid weaker risk tone, fresh USD selling

• USD/CHF meets with a fresh supply on Monday and is weighed down by a combination of factors.
• A weaker risk tone underpins the safe-haven CHF and exerts pressure amid renewed USD selling.
• Bets for more Fed rate hikes could help limit losses for the buck and lend some support to the pair.

The USD/CHF pair comes under some renewed selling pressure on Monday and drops to a one-week low during the first half of the European session. The pair is currently placed just below the 0.8900 mark and remains well within the striking distance of its lowest level since January 2021 touched earlier this month.

Worries about economic headwinds stemming from rising borrowing costs temper investors' appetite for riskier assets, which is evident from a fresh leg down in the equity markets, which, in turn, benefits the safe-haven Swiss Franc (CHF). The US Dollar (USD), on the other hand, turns lower for the third successive day amid a further decline in the US Treasury bond yields and contributes to the intraday selling bias around the USD/CHF pair.

That said, the prospects for further policy tightening by the Federal Reserve (Fed) could act as a tailwind for the US bond yields and help limit losses for the Greenback. In fact, the markets have nearly fully priced in a 25 bps lift-off at the May FOMC policy meeting and the Fed funds future indicates a smaller chance of another rate hike in June. The bets were reaffirmed by the recent hawkish commentary by a slew of influential FOMC policymakers.

Moreover, the incoming US macro data suggested that the world's largest economy remained resilient and reaffirmed market bets that the Fed will continue raising interest rates to curb inflation. In the absence of any relevant market-moving economic releases from the US, the aforementioned fundamental backdrop warrants some caution before positioning for any further fall for the USD/CHF pair ahead of this week's key US macro data.

This week's rather busy US economic docket kicks off with the release of the Conference Board's Consumer Confidence Index on Tuesday, followed by Durable Goods Orders on Wednesday. The focus, however, will remain glued to the Advance US Q1 GDP report on Thursday and the Core PCE Price Index - the Fed's preferred inflation gauge - on Friday, which will help determine the near-term trajectory for the USD/CHF pair.

Technical levels to watch