USD/CHF snaps three-day uptrend above 0.9000 amid US default concerns, Fed Chair Powell eyed

• USD/CHF clings to mild losses as bulls take a breather at five-week high.
• Market’s anxiety ahead of key risk events underpins Swiss Franc demand.
• Fed’s Powell need to defend hawkish bias to favor US Dollar bulls.
• US President Biden has tough challenge of extending debt limit.

USD/CHF takes offers to refresh the intraday low near 0.9040 as it retreats from a five-week high heading into Friday’s European session.

In doing so, the Swiss Franc (CHF) pair prints the first daily loss in four as the US Dollar struggles to defend the latest run-up amid mixed concerns about the US policymaker’s optimism of getting the debt limit passed ahead of its expiry. Also weighing on USD/CHF pair could be the fresh fears surrounding the US-China ties, as well as anxiety prior to the speech from Federal Reserve Chairman Jerome Powell.

US Dollar Index (DXY) consolidates weekly gains at the highest levels in two-months, down 0.12% intraday near 103.40 by the press time, amid the headlines suggesting the US House Freedom Caucus’s capacity to block any agreement to raise the $31.4 trillion debt ceiling. Further, geopolitical fears emanating from the US-Taiwan trade deal ahead of planned meetings between China's Commerce Minister Wang Wentao and USTR Tai and US Commerce Secretary Gina Raimondo, also exert downside pressure on the USD/CHF price.

It should, however, be noted that a slump in the market’s bets on the US Federal Reserve (Fed) rate cut in 2023, as well as an increase in the odds of a 0.25% rate hike in June, joined firmer US data and hawkish Fed talks to previously propel the DXY. Additionally favoring the greenback bulls, as well as fueling the USD/CHF prices, were concerns that the US policymakers will be able to overcome the default fears.

Against this backdrop, S&P500 Futures struggle to refresh the yearly top as it prints mild gains near 4,220 after rising to the highest levels since August 2022 the previous day. On the same line, stocks in the Asia-Pacific region trade mixed whereas the US 10-year and two-year Treasury bond yields snap the five-day uptrend by easing to 3.63% and 4.23% in that order.

Looking forward, Fed Chair Jerome Powell’s speech will be the key to forecasting the USD/CHF moves amid recently hawkish Fed bias. Following that, US President Joe Biden’s press conference, likely on late Sunday, about the debt ceiling extension should be eyed carefully as any negative surprise won’t hesitate to reverse the US Dollar’s latest run-up.

Technical analysis

Despite the latest retreat, the USD/CHF pair remains above the 50-DMA support of 0.9035, which in turn enables it to aim for an April 10 swing high of near 0.9115.