USD/CHF rebounds from multi-year lows, moves closer to 0.9200 mark ahead of FOMC

• A combination of factors assisted USD/CHF to stall its recent downfall to multi-year lows.
• The risk-on mood undermined the safe-haven Swiss franc and extended some support.
• A modest USD bounce from two-year lows remained supportive ahead of FOMC decision.

The USD/CHF pair managed to rebound around 40-45 pips from multi-year lows and was last seen hovering near session tops, around the 0.9185 region.

The upbeat market mood – as depicted by strong gains in the US equity futures – undermined the Swiss franc's perceived safe-haven status. This coupled with an intraday US dollar bounce from two-year lows assisted the USD/CHF pair to attract some buying around the 0.9140 region and stall its recent bearish trajectory to the lowest level since May 2015.

Meanwhile, the USD uptick lacked any obvious fundamental catalyst and could be solely attributed to some repositioning trade ahead of Wednesday's highly anticipated FOMC decision. Given that the markets have already priced in a dovish shift in the policy stance by the Fed, investors opted to lighten their bearish bets heading into the key event risk.

Worries that the US economic recovery could be grinding to a halt in the wake of the resurgence in coronavirus cases have been fueling speculations that the Fed will add more stimulus to support the economy. Hence, the focus will be on the accompanying policy statement, where investors will look for a potential change in the forward guidance.

A less dovish outlook might prompt some aggressive short-covering move around the greenback, which, in turn, should provide an additional boost to the USD/CHF pair's attempted recovery move. Nevertheless, Wednesday's Fed decision will play a key role in influencing the USD price dynamics and provide a fresh directional move to the major.

Technical levels to watch