Despite slight USD strength and a resurgence in risk sentiment, USD/CHF maintains its intraday gains

The USD/CHF pair finds support near the significant 0.8500 level on Tuesday, continuing the recovery from its recent lows since early January. Currently, the pair has halted a five-day losing streak and trades just above the mid-0.8500s in the early European session.

Global equity markets have surged due to bargain buying after recent sharp declines, which has reduced demand for the safe-haven Swiss Franc (CHF). Meanwhile, a risk-on sentiment has led to a substantial rise in US Treasury bond yields, aiding the US Dollar (USD) in rebounding further from a multi-month low reached on Monday. This has driven the USD/CHF pair higher, although significant appreciation remains constrained.

Recent softer US macroeconomic data has heightened concerns about a potential downturn in the US economy and has increased expectations for more substantial interest rate cuts by the Federal Reserve (Fed). Market participants are now almost certain of a 50 basis points rate cut at the September FOMC policy meeting. This expectation could limit US bond yields and deter USD bulls from making aggressive bets, thus capping gains for the USD/CHF pair.

Additionally, the risk of a broader Middle East conflict continues to weigh on market sentiment. Concerns have resurfaced after Iran, Hamas, and the Lebanese group Hezbollah vowed to retaliate against Israel for the recent assassination of Hamas political chief Ismail Haniyeh in Tehran. This situation is likely to limit losses for the CHF and calls for caution before anticipating any further appreciation in the USD/CHF pair, especially in the absence of significant US macroeconomic data.

Paraphrasing text from "FX Street" all rights reserved by the original author.