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20 May 2022

USD/CHF recovers further from monthly low, steadily climbs back closer to mid-0.9700s

  • USD/CHF stage modest recovery from a fresh monthly low touched earlier this Friday.
  • The risk-on impulse undermined the safe-haven CHF and acted as a tailwind to the pair.
  • Rebounding US bond yields helped revive the USD demand and remained supportive.
  • Recession fears held back bulls from placing aggressive bets and might cap the upside.

The USD/CHF pair traded with a mild positive bias through the early North American session and was last seen hovering near the daily peak, around the 0.9740-0.9745 region.

Having shown some resilience below the 0.9700 mark, the USD/CHF pair staged modest bounce from a fresh monthly low touched earlier this Friday amid the risk-on impulse. The market sentiment got a boost after the People’s Bank of China (PBOC) cut its five-year loan prime rate by 15 basis points to counter an economic slowdown. This was evident from the strong recovery in the equity markets, which undermined the safe-haven Swiss franc and acted as a tailwind for the major.

On the other hand, the US dollar drew some support from rebounding US Treasury bond yields and the prospects for a more aggressive policy tightening by the Fed. This was seen as another factor that contributed to the USD/CHF pair's intraday recovery of over 50 pips. That said, concerns about softening global economic growth kept a lid on the optimism and held back bulls from placing aggressive bets amid absent relevant market-moving economic release from the US.

The markets remain worried that a more aggressive move by major central banks to constrain inflation could pose challenges to global economic growth. Apart from this, the Russia-Ukraine war and extended COVID-19 lockdowns in China have been fueling recession fears. This might continue to drive some haven flows, making it prudent to wait for strong follow-through buying before confirming that the USD/CHF pair has formed a near-term bottom and positioning for any further gains.

Technical levels to watch

 

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