USD/CHF sits near monthly peak as bulls await move beyond 0.8000 amid a firmer USD

The USD/CHF pair attracts fresh buyers following a modest Asian session dip to the 0.7970 area and touches a fresh high since January 19 at the start of a new week. Spot prices, however, struggle to capitalize on the strength and currently trade just below the 0.8000 psychological mark, nearly unchanged for the day.

The US Dollar (USD) continues with its relative outperformance in the wake of rising military activity in the Middle East and turns out to be a key factor acting as a tailwind for the USD/CHF pair. The US-Iran war shows signs of entering a new and more dangerous phase, with reports suggesting that the Pentagon is preparing for weeks of ground operations in Iran. Adding to this, the entry of the Iran-backed militant group in Yemen, Houthis, in the war raises the risk of a further escalation of the conflict and benefits the USD's global reserve currency status.

Meanwhile, Iran-aligned Houthis claimed two missile launches at Israel within 24 hours and warned that further attacks would follow in the coming days. Furthermore, concerns that attacks on shipping by Houthi rebels in the Bab el-Mandeb Strait could severely disrupt global trade against the backdrop of the effective closure of the Strait of Hormuz. This, in turn, pushes Crude Oil prices higher, fueling inflation fears and hawkish US Federal Reserve (Fed) expectations. The outlook provides an additional boost to the USD and supports the USD/CHF pair.

The aforementioned fundamental backdrop seems tilted firmly in favor of the USD bulls and backs the case for a further near-term appreciating move for the currency pair. However, the lack of follow-through buying warrants some caution, making it prudent to wait for a sustained strength above the 0.8000 mark before positioning for an extension of the monthly uptrend.