- USD/CHF recovers to a five-month high around 0.8970 as the US dollar gains sharply on Fed policy.
- The Fed is expected to cut interest rates by 25 basis points to 4.25%-4.50%.
- Investors expect the SNB to cut interest rates further as the risk of inflation falling below the SNB’s target has increased.
The USD/CHF pair continued its winning streak on Tuesday, the eighth trading day. The Swiss franc hit a new five-month high of 0.8970 as the Swiss franc (CHF) fell on expectations that the Swiss National Bank (SNB) will further ease its monetary policy to avoid the risk of undershooting the central bank’s inflation target. remains weak across the board.
Last week, the SNB unexpectedly cut interest rates by 50 basis points (bp) to 0.5%, while investors had expected a 25 bp cut.
This week investors will focus on the fourth edition of the SNB Bulletin, which includes the “Monetary Policy Report” and the “Economic Situation Report”.
Meanwhile, the outperformance of the US dollar (USD) has also strengthened the Swiss franc. The US Dollar Index (DXY) climbed to almost 107.00 ahead of the US Federal Reserve’s (Fed) interest rate decision on Wednesday. According to a Bloomberg survey, the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, but will be slightly hawkish on the monetary policy outlook.
The USD/CHF pair appears confident of making a decisive break above the supply zone marked between 0.8925 and 0.8950 on the daily chart. The 20-day exponential moving average (EMA) at 0.8856 suggests an uptrend.
The 14-day Relative Strength Index (RSI) is fluctuating in the bullish zone between 60.00 and 80.00, indicating strong bullish momentum.
After breaking the intraday high of 0.8975, the price could approach the psychological resistance at 0.9000 and the July 2 high at 0.9050.
In an alternative scenario, a move below round support at 0.8700 could pull the price towards the October 23 low at 0.8650, followed by the November low at 0.8616.
