USD/CHF stands tall near multi-month peak, above 0.9200 mark on bullish USD

• USD/CHF is seen consolidating its recent strong positive move to a six-month high.
• The Fed’s hawkish outlook continues to underpin the USD and remains supportive.
• The risk-off mood benefits the safe-haven CHF and keeps a lid on any further gains.

The USD/CHF pair reverses a modest Asian session dip on Thursday and now trades above the 0.9200 mark, well within the striking distance of its highest level since late March touched the previous day.

Despite a modest downtick in the US Treasury bond yields, the US Dollar (USD) manages to hold steady near a 10-month high and turns out to be a key factor acting as a tailwind for the USD/CHF pair. Market participants now seem convinced that the Federal Reserve (Fed) will stick to its hawkish stance and have been pricing in the possibility of at least one more rate hike by the end of this year.  The bets were reaffirmed by the overnight hawkish comments by Minneapolis Fed President Neel Kashkari, saying that it is not clear yet whether the central bank is finished raising rates amid ample evidence of ongoing economic strength.

Adding to this, the better-than-expected release of the US Durable Goods Orders prompted some economists to raise the third-quarter GDP growth estimates and should allow the Fed to keep rates higher for longer. This, in turn, pushed the yield on the yield on the benchmark 10-year US government bond to a 16-year peak and favours the USD bulls. That said, extremely overbought conditions, along with the increasing possibility of a US government shutdown, hold back the USD bulls from placing fresh bets. Republican US House Speaker Kevin McCarthy on Wednesday rejected a stopgap funding bill advancing in the Senate.

This comes on top of persistent worries over China's ailing property sector and concerns about economic headwinds stemming from rapidly rising borrowing costs, which, in turn, tempers investors' appetite for riskier assets. This is evident from the prevalent risk-off environment and benefits the Swiss Franc's (CHF) relative safe-haven status, keeping a lid on any further gains for the USD/CHF pair. Traders now look to the US economic docket, featuring the final Q2 GDP print and the usual Weekly Initial Jobless Claims. This, along with the US bond yields, might influence the USD and provide some impetus to the USD/CHF pair.

Technical levels to watch