Ella 
USD/CHF attracted some bargain hunting during Monday’s Asian session and is currently trading around the 0.8660-0.8665 area, just below last week’s swing highs.
The U.S. dollar index started the new week higher following hawkish comments from Federal Reserve Governor Michelle Bowman on Sunday. Bowman pointed out that the Fed may not be ready to cut interest rates in September. With the labor market continuing to be strong, the Fed still believes that there are upward risks to inflation. In addition, broad stock market gains weakened the safe-haven Swiss franc, supporting the currency pair’s gains.
Still, geopolitical risks from ongoing conflicts in the Middle East dampened market optimism. In fact, the Israel Defense Forces (IDF) intercepted about 30 warheads entering northern Israel from Lebanon early Monday morning. Additionally, the Israeli Air Force and Military Intelligence have been put on high alert after observing conditions in western Iran, suggesting that Iran may attack Israel within days.
In addition, expectations for a deeper interest rate cut by the Federal Reserve may prevent USD bulls from building large positions, thereby limiting the upside of USD/CHF. Traders seemed more willing to wait and see before the latest U.S. inflation data – Producer Price Index (PPI) and Consumer Price Index (CPI) – were released on Tuesday and Wednesday respectively.
Meanwhile, looking at the fundamental backdrop, it would be prudent to wait for some follow-through buying before betting on USD/CHF extending its strong rally from the 0.8430 area, its lowest levels since early January.
