After posting its first daily gains in three days, USD/CHF continues to climb. Markets are upbeat due to US authorities’ consideration of bank deposit insurance. Yields increase on hawkish Fed wagers and conflicting reactions to the impact on the banking industry. Swiss trade data with US housing information may amuse intraday traders.
Early on Tuesday morning in Europe, USD/CHF picks up bids to renew its intraday high as it extends its gains from the previous day—the first in three days.
The recent Swiss Franc (CHF) pair increase may be related to the US Dollar’s corrective bounce off the five-month low on hawkish Fed expectations. After a crisis in the US and Europe, there is cautious optimism over recent banking sector developments.
The US Dollar Index (DXY) recovers from the lowest point seen since early February, established the day before, and breaks a three-day decline. It was moderately bid at approximately 103.40 at the time of publication. To entice buyers ahead of the crucial Federal Open Market Committee (FOMC) Monetary Policy Meeting, due for publication on Wednesday, the greenback’s measure against the six major currencies follows the late Monday rebound in the US Treasury bond rates as well as the hawkish Fed wagers.
The US 10-year and two-year Treasury bond rates returned from the lowest levels since September 2022 on Monday, although they are still active after the previous day’s rally from a multi-day low. Also, the likelihood of a 0.25% Fed rate increase on Wednesday is now 75%, according to CME’s FedWatch tool, up from 65% last week.
In contrast, an article from Bloomberg implies that traders will find comfort in the looming financial crisis. This will pressure the demand for the US Dollar as a haven and test the upside of the USD/CHF exchange rate. “US authorities are examining how they can temporarily extend Federal Deposit Insurance Corporation (FDIC) coverage to all depositors, a step sought by a consortium of banks saying that it’s essential to stave off a future financial catastrophe,” said Bloomberg.
The Treasury Department staff are examining whether federal regulators have enough emergency authority to temporarily insure deposits greater than the current $250,000 cap on most accounts without formal consent from a sharply divided Congress, according to anonymous people with knowledge of the talks, who were quoted in the news.
It should be highlighted that concerns about the FDIC’s incapacity to insure US bank deposits because of the reserve’s financial constraints combined with skepticism about the UBS-Credit Suisse transaction to test the risk-on tenor during a slow Asian session.
S&P 500 Futures post modest gains amid these bets to convey cautious confidence.
Swiss February trade figures will be released before US second-tier home data to provide USD/CHF traders with some entertainment. Yet, because the Swiss National Bank (SNB) has already argued for a policy shift, the Fed vs. SNB battle will get the majority of attention.
Technical Analysis
At 0.9300, a two-week-old declining resistance line puts the USD/CHF bulls to the test.