• USD/CHF reverses an intraday dip to the lowest level since July 4 amid resurgent USD demand.
• A goodish pickup in the US Treasury bond yields helps the USD to stall the post-FOMC decline.
• Recession fears could underpin the safe-haven CHF and cap the pair ahead of the US GDP print.

The USD/CHF pair drops to a three-and-half-week low during the first half of the European session on Thursday, though manages to find some support at lower levels. Spot prices have now bounced back to the 0.9600 neighbourhood, though the attempted recovery lacked bullish conviction.

As investors look past a less hawkish FOMC, the US dollar is staging a solid rebound from its lowest level since July 6 touched earlier this Thursday amid a goodish pickup in the US Treasury bond yields. This is turning out to be a key factor that offers some support to the USD/CHF pair.

Fed Chair Jerome Powell on Wednesday eased fears about more aggressive policy tightening. The markets, however, seem convinced that the Fed would have to hike 50 bps at each meeting in the remainder of this year, which, in turn, is acting as a tailwind for the US bond yields.

The overnight optimistic move in the US equity markets, meanwhile, seems to be fading rather quickly amid growing worries about a global economic downturn. This offers some support to the safe-haven Swiss franc and might keep a lid on any meaningful upside for the USD/CHF pair.

Moving forward, the focus now shifts to the release of the Advance US Q2 GDP report later during the early North American session. The world's largest economy is anticipated to have grown by a 0.4% annualized pace during the April-June period, avoiding a technical recession.

A surprisingly stronger reading would be enough to spark a fresh USD rally and prompt aggressive short-covering around the USD/CHF pair. This, in turn, would suggest that spot prices have formed a near-term bottom and pave the way for some meaningful appreciating move.

Technical levels to watch