• USD/CHF prints mild gains after two-day losing streak, grinds higher of late.
• Market sentiment dwindles as UBS-Credit Suisse deal struggle to please traders amid fears of more banking fallouts.
• Fed’s 0.25% rate hike appears given but SNB may surprise markets.
• Preliminary readings of March PMIs, baking sector headlines also appear important for fresh impulse.

USD/CHF struggles to defend the first daily gains in three as it seesaws around 0.9270 during early Monday morning in Asia. It should be noted that the Swiss Franc (CHF) pair posted the first weekly gain in the last three even as the US Dollar marked broad losses.

The reason could be linked to the speculations surrounding the Swiss National Bank’s (SNB) refrain from tighter monetary policy measures amid the latest Credit Suisse fallout. However, the news that the UBS is up for buying the troubled Credit Suisse also offered a sigh of relief to the market sentiment and helps the US Treasury bond yields to recover, which in turn allows the USD/CHF to remain mildly bid.

On the contrary, news shared by Reuters suggesting two more banks are struggling in Europe seemed to have also favored the USD/CHF bulls. On the same line could be the market’s cautious mood ahead of the key monetary policy meeting of the US Federal Reserve (Fed) and the Swiss National Bank (SNB).

The banking sector rout drowned the market sentiment in the last week but the US Dollar and the Swiss Franc had to fall amid downbeat Treasury bond yields, as well as the SNB’s role in defending the Credit Suisse. It should be noted that the downbeat US data added strength to the greenback’s south-run the previous week.

During the last week, the US Consumer Price Index (CPI) for February matched 6.0% YoY market expectations versus 6.4% prior while the Retail Sales also marked -0.4% MoM figure versus -0.3% expected and 3.2% previous readings. Further, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

Against this backdrop, Wall Street closed with losses and the US two-year Treasury bond yields dropped the most in three years.

Moving forward, a light calendar could restrict USD/CHF moves on Monday but the bulls are likely to keep the reins amid hopes of that the SNB may cite the banking sector fallout to disappoint markets. That said, the Fed is expected to announce 0.25% rate hike while the SNB is up for another 0.50% increase in the benchmark rate during their upcoming monetary policy meetings on Wednesday and Thursday respectively.

Technical analysis

Sustained bounces off the 50-DMA, close to 0.9260 at the latest, could help USD/CHF to challenge a one-week-old descending resistance line, around 0.9295 by the press time.