Ella 
USD/CHF traded within a tight range during the Asian session on Tuesday, consolidating recent strong gains to reach its highest level since late May hit the previous day. USD/CHF is currently trading around 0.9125 and appears poised to continue its two-month upward trajectory.
The Swiss National Bank (SNB) surprised markets last Thursday by deciding to pause its interest rate hike cycle for the first time since March 2022, noting that inflation has come back down. This therefore continues to weigh on the Swiss franc (CHF) and, together with the USD maintaining underlying bullish sentiment, is seen as a “tailwind” for USD/CHF. Indeed, the U.S. dollar index (DXY), which tracks the greenback against a basket of currencies, held on to the 10-month high hit on Monday and continued to be strongly supported by the hawkish outlook of the Federal Reserve (FED).
The U.S. central bank reiterated its view that interest rates will remain high for the longer term and warned that continued inflation could tempt the Fed to raise interest rates at least once before the end of the year. In addition, investors are now increasingly wary of the possible inflationary impact of rising oil prices. This, coupled with restorative growth in U.S. macro data, should allow the Fed to maintain its hawkish stance. At the same time, the prospect triggered a sustained sell-off in U.S. fixed-income markets, pushing yields on rate-sensitive two-year government bonds to their highest levels since 2006.
The 10-year U.S. Treasury yield also climbed to a 16-year peak, further exceeding the 4.50% mark, continuing to support the dollar. That said, extremely overbought conditions on the RSI indicator on the daily chart prevent the market from placing new bullish bets on USD/CHF. Meanwhile, USD/CHF’s latest break above the technically important 200-day simple moving average (SMA) suggests that spot prices face minimal upside resistance, with long trades more likely on any USD/CHF consolidation pullback.
Market participants will now turn their attention to the U.S. economic calendar, which includes the release of the Conference Board Consumer Confidence Index, new home sales and the Richmond Manufacturing Index. This, along with US bond yields, will impact USD volatility and lead to USD/CHF trading opportunities.
