USD/CHF oscillates in a range just above 0.8650, upside potential seems limited

• USD/CHF attracts some buying on Monday, though it lacks continuation or bullish conviction.
• The USD consolidates its recent gains and continues to act as a tailwind for the pair.
• The upside remains limited as traders look forward to Wednesday’s crucial FOMC decision.

The pair USD/CHF has attracted some buying near the 0.8640-0.8635 area during the Asian session on Monday, although it has failed to capitalize on the modest intra-day rally. The pair trades just above the 0.8650 zone and remains near one-week highs achieved last Thursday.

The US Dollar (USD) is holding on to its recent recovery gains from its lowest level since April 2022 hit last week and turns out to be a key factor acting as a tailwind for the USD/CHF pair. Having said that, expectations that the Federal Reserve (Fed) is nearing the end of its current tightening cycle hold back USD bulls when opening aggressive positions and limits any significant rise for the USD/CHF pair.

It is worth remembering that markets have been discounting the possibility of further rate hikes by the US central bank after the widely anticipated 25 basis point hike in July. However, investors doubt the Fed will take a more dovish stance or stick with its forecast for a 50 basis point rate hike by the end of the year. Therefore, attention will remain focused on the outcome of the two-day FOMC policy meeting, which will take place on Wednesday.

Aside from the key FOMC decision, investors will review the accompanying monetary policy statement and comments from the Fed Chairman, Jerome Powell, in the press conference after the meeting in search of clues about the future path of interest rate hikes. The outlook, in turn, will play a key role in influencing short-term USD price dynamics and help investors determine the next directional move for the USD/CHF pair.

Meanwhile, Worries about a global economic downturn, coupled with worsening US-China trade relations and geopolitical risks, could support the safe-haven Swiss Franc (CHF). and limit the profits of the pair. Ahead of the key central bank event, preliminary US PMI data for July will be released on Monday and could create short-term opportunities around the USD/CHF pair early in the American session.

Technical levels to watch