USD/CHF sticks to modest gains around 0.9200 mark ahead of US ADP report

• USD/CHF gained traction for the second straight day and was supported by a combination of factors.
• A positive risk tone undermined the safe-haven CHF and extended some support amid stronger USD.
• Traders now eye US ADP report/Powell’s testimony for some impetus amid the Russia-Ukraine saga.

The USD/CHF pair held on to its modest intraday gains heading into the North American session and was last seen trading just a few pips below the 0.9200 mark.

A combination of supporting factors assisted the USD/CHF pair to attract some buying near the 0.9165 region on Wednesday and move into the positive territory for the second successive day. Receding safe-haven demand undermined the Swiss franc and acted as a tailwind for the major amid modest US dollar strength.

As investors digest the recent developments surrounding the Russia-Ukraine saga, a goodish recovery in the equity markets drove investors away from traditional safe-haven assets. A slight improvement in the risk sentiment was reinforced by an uptick in the US Treasury bond yields, which extended support to the buck.

Apart from this, the worsening situation in Ukraine continued benefitting the greenback's status as the global reserve currency and also extended support to the USD/CHF pair. In fact, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv.

That said, diminishing odds for a 50 bps Fed rate hike move in March held forced the USD to pare a part of its intraday gains to the highest level since June 2020. The recent geopolitical developments now seem to have convinced investors that the Fed would adopt a less aggressive policy stance to combat high inflation.

Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move. Market participants now look forward to the US ADP report on private-sector employment. This, along with Fed Chair Jerome Powell's semi-annual testimony, might provide some impetus to the USD/CHF pair.

Technical levels to watch