USD/CHF reverses a modest intraday dip, flat-lined below 0.9200 mark

• USD/CHF attracted some dip-buying on Friday amid a broad-based USD strength.
• Expectations that the Fed will begin tapering soon extended support to the USD.
• The risk-off mood underpinned the safe-haven CHF and capped gains for the pair.

The USD/CHF pair bounced around 30 pips from daily swing lows and climbed to the top end of its daily trading range, around the 0.9185-90 region, though lacked any follow-through.

The pair attracted some dip-buying near the 0.9160 region in the last trading day of the week and is now looking to build on this week’s positive move from sub-0.9100 levels. The uptick was exclusively sponsored by the prevalent strong bullish sentiment surrounding the US dollar, bolstered by expectations that the Fed will begin reducing the pace of its massive asset purchases later this year.

The minutes of the latest FOMC meeting held on July 27-28 seems to have convinced investors that the Fed is now comfortable to roll back its pandemic-era stimulus. Policymakers thought that the benchmark of substantial further progress criterion has been met in terms of inflation and maximum employment. This, in turn, pushed the key USD Index to a nine-and-half-month high on Friday.

Apart from the possibility that the Fed might announce its tapering plan at the next meeting in September, COVID-19 jitters dented investors' appetite for perceived riskier assets. This was evident from the prevalent risk-off mood around the equity markets, which underpinned the safe-haven Swiss franc and turned out to be the only factor that capped gains for the USD/CHF pair.

In the absence of any major market-moving economic releases from the US, market participants now await fresh catalysts before placing any aggressive directional bets. Hence, the focus shifts to the Jackson Hole Symposium scheduled for 26 to 28 August. In the meantime, the USD price dynamics and the broader market risk sentiment might produce some trading opportunities around the USD/CHF pair.

Technical levels to watch