USD/CHF jumps back to two-week high set on Tuesday, around 0.9200 mark ahead of FOMC

• USD/CHF gained traction and scaled higher for the third successive session on Wednesday.
• Stability in the equity markets undermined the safe-haven CHF and extended some support.
• Fed rate hike bets acted as a tailwind for the USD and remained supportive of the move up.

The USD/CHF pair inched back closer to a two-week high during the first half of the European session, with bulls making a fresh attempt to conquer the 0.9200 mark.

A combination of supporting factors assisted the pair to attract some dip-buying near the 0.9160 region on Wednesday and turn positive for the third successive day. Despite rising geopolitical risks, signs of stability in the equity markets undermined the safe-haven Swiss franc and extended some support to the major. Apart from this, the uptick was further supported by modest US dollar strength.

The USD held steady just below the highest level since January 10 touched on Tuesday and continued drawing support from the prospects for a faster policy tightening by the Fed. In fact, the markets seem convinced that the US central bank will begin raising interest rates in March and have been pricing in a total of four hikes in 2022 amid worries about stubbornly high inflationary pressures.

Hence, the focus will remain glued to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced later during the US session. Heading into the key central bank event risk, investors might refrain from placing aggressive directional bets. This, in turn, might turn out to be the only factor that might cap any meaningful upside for the USD/CHF pair, at least for the time being.

Hence, it will be prudent to wait for a sustained strength beyond the 0.9200 mark before positioning for an extension of this week's goodish rebound from the vicinity of the 0.9100 round figure. Nevertheless, the USD/CHF pair, so far, has managed to hold its neck comfortably above a technically significant 200-day SMA, which supports prospects for a further near-term appreciating move.

Technical levels to watch