• USD/CHF drops to a fresh multi-month low amid the emergence of fresh USD selling.
• Diminishing odds for a later Fed rate hike in September continue to weigh on the USD.
• The risk-on mood undermines the safe-haven CHF and helps limit any further downside.

The USD/CHF pair witnessed some selling for the fourth successive day and drops to a four-month low during the first half of the European session. Spot prices, however, show some resilience below the 0.9400 mark and quickly recover around 20 pips in the last hour.

The US dollar struggles to capitalize on the previous day's bounce and remains sluggish near its lowest level since late June touched in the aftermath of softer US consumer inflation figures on Wednesday. This, in turn, exerts some downward pressure on the USD/CHF pair, though sustained weakness below the 0.9400 mark is needed to confirm a bearish breakdown below a technically significant 200-day SMA.

The weaker-than-expected US CPI report forced investors to scale back expectations for a larger 75 bps Fed rate hike move in September. That said, the overnight hawkish comments by Fed officials should act as a tailwind for the greenback. Apart from this, a generally positive tone around the equity markets seems to undermine the safe-haven swiss franc and limit losses for the USD/CHF pair, at least for now.

The Fed, meanwhile, is still expected to hike interest rates by 50 bps points at the September policy meeting. This, in turn, supports prospects for the emergence of some dip-buying around the USD and further warrants some caution for aggressive bearish traders. Market participants now look forward to the US Producer Price Index (PPI) for a fresh impetus later during the early North American session.

Technical levels to watch