• USD/CHF witnessed heavy selling on Wednesday and dropped to over a two-month low.
• The SNB’s surprise rate hike in June and recession fears underpinned the safe-haven CHF.
• Sliding US bond yields kept the USD bulls on the defensive and did little to lend support.
• Investors now look forward to Fed Chair Powell’s speech for a fresh directional impetus.

The USD/CHF pair came under heavy selling pressure on Wednesday and confirmed a fresh bearish breakdown through a nearly one-week-old consolidative trading range. The downward trajectory dragged spot prices to the lowest level since April 21, with bears now awaiting sustained weakness below the key 0.9500 psychological mark.

The Swiss National Bank shocker on June 16, when it unexpectedly raised interest rates by 50 bps to curb soaring inflation, continued underpinning the Swiss franc. Apart from this, growing worries about a possible recession drove some haven flows towards the CHF and exerted additional downward pressure on the USD/CHF pair.

On the other hand, a fresh leg down in the US Treasury bond yields kept the US dollar bulls on the defensive and failed to offer any support to the USD/CHF pair. With the latest leg down, spot prices have retreated over 500 pips from the vicinity of the YTD peak, around the 1.0050 region touched earlier this month.

It, however, remains to be seen if bears are able to maintain their dominant position or opt to lighten their positions ahead of Fed Chair Jerome Powell's speech at the ECB forum in Sintra. Powell's comments will be scrutinized for clues about the policy tightening path amid division over the need for more aggressive rate hikes.

This, in turn, will play a key role in influencing the USD price dynamics and help investors to determine the next leg of a directional move. Meanwhile, a convincing break through the 0.9500 mark would be seen as a fresh trigger for bearish traders and set the stage for an extension of the USD/CHF pair's a nearly two-week-old downtrend.

Technical levels to watch