• USD/CHF edged lower on Wednesday and snapped a nine-day winning streak to a multi-week high.
• The downtick could be solely attributed to some profit-taking and is more likely to remain limited.
• Fed rate hike bets acted as a tailwind for the USD and should limit the slide ahead of the US CPI.

The USD/CHF pair extended the previous day's late pullback from the 0.9860 area, or nearly a four-week high and witnessed some selling on Wednesday. The downtick picked up pace during the early European session and dragged spot prices back below the 0.9800 round-figure mark in the last hour.

Following the recent rally of over 350 pips from sub-0.9500 levels touched on June 29, traders opted to lighten their bullish bets around the USD/CHF pair ahead of the crucial US consumer inflation figures. Apart from this, the pullback lacked any obvious catalyst and is more likely to remain limited amid the underlying strong bullish tone surrounding the US dollar.

Growing acceptance that the Fed would retain its aggressive policy tightening path to tame persistently high inflation assisted the USD to stand tall near a two-decade high touched on Tuesday. It is worth recalling that the FOMC meeting minutes released last week indicated that another 50 or 75 bps rate hike is likely at the upcoming FOMC meeting in July.

Policymakers also emphasized the need to fight inflation even if it results in an economic slowdown. Hence, the market focus will remain glued to the US CPI print, which is expected to rise from the 8.6% YoY rate in May to 8.8% YoY in June. A stronger-than-expected reading would be enough to provide a fresh boost to the greenback and the USD/CHF pair.

In the meantime, signs of stability in the financial markets could undermine the safe-haven Swiss franc and help limit the corrective pullback. This, in turn, warrants some caution for bearish traders and positioning for any meaningful intraday depreciating move. Nevertheless, spot prices, for now, seem to have snapped nine successive days of the winning streak.

Technical levels to watch