USD/CHF loses intraday gains to a new YTD peak. However, the downside appears limited in light of stronger USD

USD/CHF rose to a new YTD peak Wednesday due to USD buying interest.

The USD continued to rise despite a grim global outlook.

The risk-on impulse can undermine the safe-haven CHF, and support prospects for further gains.

The USD/CHF currency pair fell a little from its peak level in May 2020, when it was touched during the first part of the European session. It was last seen trading at the low-0.9600s.

The pair extended its bullish streak that began at the beginning of the month, and gained momentum for the fifth consecutive day on Wednesday. Sustained buying around the US Dollar, which rose to a peak of more than two years amid the prospect for an aggressive Fed policy tightening, helped fuel the momentum.

Investors expect the Fed to increase interest rates 50 bps at its four next meetings in May June July August and September. Recent hawkish comments made by prominent FOMC members including Fed Chair Jerome Powell, reaffirmed these bets. The greenback was elevated to reserve currency status due to this and the worsening global economic outlook.

Fears of global slowdown have been raised by the US's expectation for rapid interest rate increases, the prolonged Russia-Ukraine war and the recent COVID-19 outbreak in China. Investors are now worried that Russia might follow through on its threats to stop gas flow to countries refusing to pay in roubles for fuel and cut off supply to Europe.

However, traders were unable to place new bullish bets due to extremely overbought market conditions. This kept the USD/CHF exchange rate from gaining further, at least for now. However, the intraday bias remains in favor of bulls despite the strong bullish sentiment surrounding USD and the risk-on impulse that tends to weaken the safe-haven Swiss Franc.

Market participants are now looking forward to the second-tier US economy releases as an impetus for later in the North American session. The USD's price dynamics would be affected by the data and Fed rate hike expectations. To take advantage of short-term opportunities, traders will also look at the wider market risk sentiment.

Date Of Update: 30 July 2022, 06:25