USD/CHF Moves Sideways to 1.0020 as DXY Holds Steady and Powell Warns of Additional 50 bps Rate Hikes

The USD/CHF pair is experiencing a pullback as momentum oscillators on the lower timeframe have become very overbought. During the Asian trading session, the pair is fluctuating within a tight range of 1.0024 to 1.0035. Sustaining the dollar bulls above the psychological support of 1.0000 will be advantageous going forward.

The pair has stayed in the grip of dollar bulls as measured by the rising US dollar index (DXY). The DXY is gaining significantly due to optimistic economic statistics. The outperformance of the US Nonfarm Payrolls (NFP) and the higher-than-expected publication of the US Consumer Price Index (CPI) and Producer Price Index (PPI) have increased the likelihood that the Federal Reserve (Fed) will implement more significant rate hikes this year.

After reaching a new 19-year high of 104.93 during the European session, the DXY is undergoing a minor pullback in the Asian session. In an interview with the national radio program Marketplace, Fed chair Jerome Powell said that the Fed may raise interest rates by 50 basis points (bps) at each of the next two policy sessions. In addition, the Fed promises that "we're prepared to do more" if data deteriorate.

In the meantime, the Swiss franc faces a prolonged dramatic sell-off as their ultra-loose monetary policy fails to stimulate demand growth in their economy. In addition, the unchanged unemployment rate and inflation figures failed to provide a buffer for the asset.

USD/CHF