There will be significant caution ahead of Wednesday’s Federal Reserve statement with some scope for a further covering of short dollar positions with scope for USD/CHF to recover 0.9500 and potentially push towards the 0.9550 level.
Late in the US session on Monday there were further comments from Swiss National Bank Chairman Jordan that the franc was still significantly overvalued. Jordan reiterated that interest rates would remain in negative territory and that the bank would expand the balance sheet as necessary.
There was nothing new in the comments, although the rhetoric did help stem franc buying. USD/CHF still retreated to 23-month lows just below 0.9740 before finding some support.
The German IFO index rose to 116.0 for July from a revised 115.2 the previous month with a gain in both the current assessment and expectations components pushing the overall index to a record high.
The data maintained optimism surrounding the German and Euro-zone economy and pushed German bund yields higher.
The Euro gained fresh support from the data with EUR/USD eventually pushing to test levels above 1.1700 for the first time since August 2015.
There was a significant EUR/CHF move higher on the day to the 1.1070 area which helped cushion USD.CHF to an important extent.
The slide in German bonds and sharp increase in yields was a key factor undermining Swiss currency demand and US yields also moved higher with the 10-year rate moving to above 2.30%.
In this context, the USD/CHF was able to avoid sliding to a fresh 23-month lows.
US consumer confidence strengthened to 121.1 for July from a revised 117.3 in June which provided a further slight lift to the dollar and the US currency gained some support into the London fix with highs near 0.9490.
Given the Swiss yield structure, any further move higher in global bond yields would tend to undermine the Swiss currency.
USD/CHF 4-Hour Chart