USD/CHF dives to four-week lows, seems vulnerable near 0.9200 mark

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  • USD/CHF witnessed heavy selling for the second straight session on Thursday.
  • The ongoing USD corrective slide was seen as a key factor exerting pressure.
  • The risk-on mood did little to undermine the safe-haven CHF or lend support.

The emergence of fresh selling around the USD dragged the USD/CHF pair to four-week lows, sub-0.9200 levels during the early part of the European session.

Despite a slightly stronger US CPI report, investors seem unconvinced about a sustained period of inflation. This was evident from a further decline in the longer-term US Treasury bond yields, which triggered a sharp US dollar corrective slide from 13-month tops. The pullback extended through the first half of the trading action on Thursday, which, in turn, dragged the USD/CHF pair lower for the second successive day.

Meanwhile, the minutes of the September FOMC monetary policy meeting revealed that the Fed remains on track to begin tapering its bond purchases in 2021. Moreover, a growing number of policymakers were worried about the continuous rise in inflationary pressure, forcing investors to bring forward the likely timing of a potential rate hike. This, however, did little to impress the USD bulls or lend any support to the USD/CHF pair.

Even the risk-on impulse in the equity markets, which tends to undermine demand for the traditional safe-haven Swiss franc, failed to ease the intraday bearish pressure around the USD/CHF pair. With the latest leg down, the pair has now reversed over 100 pips from levels just above the 0.9300 round-figure mark. A sustained break below the 0.9225-20 region might have already set the stage for an extension of the ongoing depreciating move.

Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims. This, along with the US bond yields and scheduled speeches by influential FOMC members, will influence the USD and provide a fresh impetus to the USD/CHF pair.

Technical levels to watch