USD/CHF: Cup and handle pattern hints to a climb to 0.9400
- The USD/CHF pair has formed a cup and handle pattern.
- The Swiss National Bank left interest rate unchanged.
- The bank also committed to continue intervene in the market.
The USD/CHF price rose after the first Swiss National Bank (SNB) interest rate decision. It rose to 0.9375, which was the highest level since March 9. Similarly, the EUR/CHF and GBP/CHF also rallied.
SNB interest rate decision
The SNB concluded its two-day meeting and did what most analysts were expecting. It decided to leave interest rates unchanged at -0.75% – the world’s lowest – and vowed to continue supporting the economy.
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While the Swiss franc has weakened substantially against key currencies, the bank lamented that the currency remains overvalued. As a mostly exporting country, a stronger franc tends to have adverse effects on their industries.
Notably, the bank said that it would commit to intervene in the foreign exchange market if needed. Indeed, the bank spent more than $118 billion in 2020 to support the franc, the highest figure since 2012.
It now expects the country’s inflation to rise to 0.2% in 2021 and 0.4% in 2022. This is a higher forecast than in the past meeting and is primarily due to the higher crude oil prices. It also expects the economy to grow by between 2.5% and 3% this year, meaning that the economy will go back to the pre-pandemic level in the second half of the year. The bank said:
“the economic recovery has lost momentum since October 2020 in the wake of the second wave of the pandemic. However, economic activity has been restricted less strongly by comparison with the first wave in spring 2020.”
The USD/CHF price also rose because of the overall stronger US dollar. The dollar index rose by 0.15% as the currency rose against its peer currencies. This happened as the US Treasury bond market continues to waver. Today, the yields on the ten-year government bond rose to 1.617% while the 30-year has jumped to 2.316%.
USD/CHF technical outlook
The four-hour chart shows that the USD/CHF price rose to a multi-month high of 0.9375 this month. It then erased those gains and declined to 0.9213 on March 17. The pair has now erased some of the previous losses and is in the process of forming a cup and handle pattern. In our free forex course, you will find that this is usually a bullish continuation pattern. Therefore, there is a possibility that the pair will keep rising as bulls target the next key resistance at 0.9400.