• USD/CHF attracts some dip-buying on Monday and reverses a major part of its intraday losses.
• The optimism over US-China relations weighs on the safe-haven CHF and lends some support.
• US debt ceiling woes weigh on the USD and might keep a lid on any meaningful recovery move.

The USD/CHF pair recovers a major part of its intraday losses to a multi-day low and trades around the 0.8975-0.8970 region, down nearly 0.25% for the day, during the early North American session.

Against the backdrop of worries about a global economic slowdown, a surprise breakdown in the US debt ceiling negotiations weigh on investors' sentiment and drives some haven flows towards the Swiss Franc (CHF). Apart from this, subdued US Dollar (USD) price action, exerts some downward pressure on the USD/CHF pair. The US debt ceiling woes, along with less hawkish remarks by Federal Reserve (Fed) Chair Jerome Powell on Friday, triggers a fresh leg down in the US Treasury bond yields and keeps the USD bulls on the defensive.

Speaking at a Fed research conference, Powell said that it is still unclear if interest rates will need to rise further amid uncertainty about the impact of past hikes and recent bank credit tightening. Furthermore, Minneapolis Fed President Neel Kashkari is out with his take this Monday, saying that it was a close call on whether he will be in favour of hiking the policy rate one more time in June or pausing. That said, the optimism over a potential improvement in US-China relations lends support to the USD/CHF pair and helps limit any further losses.

Spot prices attract some buyers near the 0.8940 region, though any meaningful upside still seems elusive ahead of a key meeting between President Joe Biden and House Republican Speaker Kevin McCarthy to discuss the debt ceiling. Apart from this, the US bond yields will influence the USD price dynamics and provide some impetus to the USD/CHF pair in the absence of any relevant market-moving economic releases from the US. This, along with the broader risk sentiment should allow traders to grab short-term opportunities around the pair.

Technical levels to watch