Following a rapid climb to around 0.9420 during the early Tokyo session, the USD/CHF pair is experiencing unstable resistance. Investors are expected to continue to favor the Swiss franc as a safe-haven asset, in order to steer clear of excessive volatility.

Federal Reserve (Fed) policymakers have stated that the current monetary policy is insufficiently restrictive to reduce persistent inflation in the near term. This suggests that future rate hikes may be necessary to cool the Consumer Price Index (CPI).

The gains made by the S&P500 on Monday were lost in Tuesday’s session as investors anticipate higher rates announced by the Fed over the summer to reduce US inflation. The US Dollar Index (DXY) has shown a responsive purchasing action and crossed the significant resistance of 104.60 amid a decrease in investors’ risk appetite. Meanwhile, the 10-year US Treasury yield has slightly increased to 3.93%.

UBS FX strategist Vassili Serebriakov disagrees with the hawkish stance on inflation, stating that “the disinflation story continues.” He believes that while there was a brief pause in January, it was not a complete turnaround, and that some of the recent strength of the dollar is overstated. Serebriakov suggests a cautious approach to fading the dollar’s strength.

On Wednesday, the USD/CHF pair will remain in focus with the release of the US ISM Manufacturing PMI data. The data has reported a figure below 50.0 for the past three months, and while a similar performance is expected today, the contraction is expected to be smaller. The latest release is at 48.0, up from the previous figure of 47.4, pointing to a gloomy outlook for the US economy.

On Tuesday, the Swiss franc faced downward pressure after the release of a flat Gross Domestic Product (GDP) (Q4), which was expected to increase by 0.3%. The Swiss government anticipates an economic slowdown this year, but not a recession, according to a statement released on Tuesday.

USD/CHF Technical Outlook

The USD/CHF pair rebounded from its previous decline and is approaching the resistance of the bullish channel. The current main target is 0.6475, and breaking this level could lead to more bullish correction with the next target at 0.9600. Holding above 0.9316 is necessary to continue the expected rise. The trading range for today is between 0.9350 support and 0.9490 resistance.