• USD/CHF gained strong follow-through traction for the fourth successive day on Wednesday.
• The Fed’s hawkish outlook lifted the USD to a near two-year high and remained supportive.
• A softer risk tone underpinned the safe-haven CHF and capped ahead of the FOMC minutes.

The USD/CHF pair maintained its strong bid tone through the first half of the European session and was last seen trading just a few pips below mid-0.9300s, or over a one-week high.

The pair built on its recent bounce from sub-0.9200 levels and gained some follow-through traction for the fourth successive day on Wednesday amid sustained US dollar buying interest. Expectations that the Fed would adopt a more aggressive policy stance to combat stubbornly high inflation pushed the USD to a nearly two-year high, which, in turn, acted as a tailwind for the USD/CHF pair.

The markets have been pricing in a 100 bps Fed rate hike move over the next two policy meetings. Adding to this, Fed Governor Lael Brainard said on Tuesday that the US central bank could start reducing its balance sheet at a rapid pace as soon as the May meeting. This, in turn, lifted the US Treasury bond yields to a multi-year peak and continued lending support to the greenback.

That said, the cautious mood - as depicted by a softer tone around the equity markets - benefitted the safe-haven Swiss franc and held back bulls from placing fresh bets around the USD/CHF pair. The market sentiment remains fragile amid fading hopes for a diplomatic solution to end the war in Ukraine and the prospect of more Western sanctions on Russia over its alleged war crimes.

Nevertheless, the near-term bias seems tilted in favour of bullish traders and supports prospects for additional gains. Traders, however, might prefer to wait on the sidelines ahead of the FOMC monetary policy meeting minutes, due for release later during the US session. In the meantime, the US bond yields will influence the USD and provide some impetus to the USD/CHF pair.

Technical levels to watch