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USD/CHF Still Making Lower Highs As SNB Chairman Sounds Hawkish

Posted Sunday, June 11, 2023 by
Skerdian Meta • 2 min read

USD/CHF has been trading on a downtrend, making lower highs since November last year. as the FED started giving dovish signals, sending the USD lower. We have seen retraces higher, but the 100 SMA (green) has been acting as resistance on the daily chart, stopping the climb twice.

Last week the 100 SMA rejected the price once again after the US ISM Services PMI was released, and it came in much lower than expected at 50.3, just barely avoiding the contraction territory. The employment sub-index also fell into contraction, and the prices paid sub-index decreased significantly, returning to the levels seen in May 2020. As a result, the market has adjusted its expectations and is now pricing out any additional rate hikes from the Federal Reserve (FED).

Switzerland’s headline Consumer Price Index (CPI) was reported at a year-on-year (Y/Y) growth rate of 2.2%, while the Core measure, which excludes volatile components, stood at 1.9% Y/Y. The Swiss National Bank (SNB) has set an inflation target slightly below 2%, so with the CPI nearing that level, it is possible that the central bank may pause at its June meeting. Even if the SNB decides to raise rates, it is likely to be the final hike in the current cycle.

Examining the daily chart of the USD/CHF currency pair, we can observe that the rally of the US dollar against the Swiss franc has encountered resistance around the 0.91 level, where the 100 SMA stood. This zone previously served as a strong support earlier this year but eventually broke down as the market began factoring in rate cuts by the Fed due to the regional banking crisis in March. On Thursday we saw a quick 130 pip flash down in this pair after the US unemployment claims jumped tothe highest level since Octobr 2021, although the 50 MA (yellow) held. So, at the moment the situation is unclear, despite comments from the Swiss National Bank charmain which sounded hawkish.