USD/CHF Breakout to Come Soon After the Squeeze
USD/CHF made a bullish reversal at the start of the new year, gaining 300 pips during the upward move, as the SNB seems content with falling Swiss inflation, while the FED is not expected to be as dovish as it was first thought a month ago. However, the climb stalled at MAs and now this pair is being squeezed between moving averages, awaiting a signal for the breakout.
That signal might have come yesterday, during the speech from Swiss National Bank Chairman Thomas Jordan, but he didn’t offer anything new, appearing happy with the way inflation is falling. The Franc has been under selling pressure as SNB underlined the risks presented by the CHF’s rise. While recent domestic price increases have been getting smaller and consumer demand has been promising, the SNB remains cautious, with its policy aimed at maintaining price stability.
Key Points from Swiss National Bank Chairman Thomas Jordan’s Speech
- Expectation of increased inflation due to VAT increase and higher electricity prices.
- Emphasis on the expectation that inflation should not exceed 2%.
- Outlook for inflation to average below 2% for the current year.
This pair started a downtrend in early October as tensions in the Middle East rose and safe havens gained traction, so sellers grabbed control of the price. The USD then began a bearish trend which lasted for two months, as the FED became increasingly dovish, suggesting rate reduction in 2024.
Mixed Emotions About Today’s FOMC Meeting
This increased even more the selling pressure on this pair, which fell to 0.8330s by the end of last year, with the most previous FOMC meeting also weighing. But market expectations for this meeting are more mixed. The rate cut odds have gone down from around 160 at the end of December, which has been helping the USD and Treasury yields. However, no one really knows how today’s FOMC meeting will go. So, both sides are at risk in USD/CHF , which has been squeezed between the 20 SMA (gray) at the bottom and the 50 SMA (yellow) at the top.
USD/CHF Live Chart
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