• USD/CHF drifts lower for the third straight day and drops to its lowest level since June 2021.
• Expectations for an imminent Fed rate-hike pause weigh on the USD and exert some pressure.
• Looming recession fears benefit the safe-haven CHF and contribute to the ongoing downfall.

The USD/CHF pair remains under some selling pressure for the third successive day on Thursday and drops to its lowest level since June 2021 during the early part of the European session.

The US Dollar (USD) languishes near the monthly low amid expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle and turns out to be a key factor weighing on the USD/CHF pair. In fact, the markets now seem convinced that the US central bank will be done with its monetary tightening after hiking one last time next month and the bets were reaffirmed by the softer-than-expected US consumer inflation figures released on Wednesday.

The crucial US CPI report lifted hopes that disinflation is progressing smoothly and may even accelerate, potentially opening the door for the Fed to cut rates during the second half of the year. Adding to this, the March FOMC meeting minutes showed that several policymakers considered pausing interest rate increases after the failure of two regional banks. This keeps the US Treasury bond yields depressed and continues to exert pressure on the Greenback.

The Fed officials, meanwhile, remain wary of a mild US recession this year in the wake of a banking crisis and as high-interest rates continue to hinder economic growth. The outlook tempers investors' appetite for riskier assets, which is evident from the prevalent cautious mood around the equity markets and benefits the safe-haven Swiss Franc (CHF). This, in turn, is seen as another factor that contributes to the offered tone surrounding the USD/CHF pair.

That said, the Relative Strength Index (RSI) on hourly charts is flashing oversold conditions and might hold back traders from placing fresh bearish bets around the USD/CHF pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside. Market participants now look to the US economic docket, featuring the Producer Price Index (PPI) and the Weekly Jobless Claims data, for a fresh trading impetus.

Technical levels to watch