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USD/CHF reverses an early dip to sub-0.9700 level, fresh yearly lows

  • The USD remains on the defensive amid increasing Fed rate cut bets.
  • Reviving safe-haven demand benefits CHF and adds to the selling bias.
  • Oversold conditions prompt some short-covering ahead of Fedspeak.

The USD/CHF quickly reversed a dip to sub-0.9700 level, or fresh yearly lows, and is currently placed at the top end of its daily trading range. 

The pair extended last week's sharp pullback from levels beyond the parity mark and a combination of forces kept exerting some downward pressure during the Asian session on Tuesday. The US Dollar added to its post-FOMC slump and remained on the defensive in the wake of sliding US Treasury bond yields.

In fact, the yield on the benchmark 10-year government bond slipped back below the 2.0% mark, which coupled with a slight deterioration in the global risk sentiment - amid escalating geopolitical tensions between the US and Iran, underpinned the Swiss Franc's safe-haven status and further collaborated to the pair's downfall.

The pair dropped to an intraday low level of 0.9694 - the lowest since late-September 2018, albeit extremely oversold conditions helped limit deeper losses and prompted traders to cover their short positions, especially after the recent steep decline of around 320-pips over the past five trading session. 

It, however, remains to be seen if bulls are able to capitalize on the move or the attempted recovery meets with some fresh supply at higher levels as the focus now shifts to speeches by influential FOMC members - including the Fed Chair Jerome Powell, which will be looked upon for some meaningful trading opportunities. 

Market participants on Tuesday will also take cues from the US economic docket - featuring the release of the Conference Board's Consumer Confidence Index, Richmond Manufacturing Index and new home sales data, later during the early North-American session.

Technical levels to watch


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