Is it safe to buy the USD/CHF ahead of the SNB decision?

By:
on Dec 15, 2021
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  • The USD/CHF pair has risen in the past three straight days.
  • Investors are waiting for the latest Fed interest rate decision.
  • The SNB will release its rate decision on Thursday.

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The USD/CHF price has risen in the past three consecutive days as investors focus on the upcoming Federal Reserve and Swiss National Bank (SNB) decision. It is trading at 0.9260, which is a few points above this month’s low of 0.9157.

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SNB interest rate decision preview

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The Swiss economy is doing relatively well as the country emerges from the pandemic. Consumer spending has risen while external demand is also doing well. 

Recent data revealed that the Swiss unemployment rate has tumbled to about 2.5%, meaning that the country has recouped most of the losses it made last year. At the same time, the Swiss inflation rate is rising although it remains below that of other countries.

However, the ongoing Omicron wave is spreading in Switzerland and thus affecting the recovery. Worsening the situation is the rising cost of doing business as evidenced by the recent producer price index (PPI) data. The ongoing supply chain challenges have also dented the growth.

As a result, the State Secretariat for Economic Affairs (SECO) announced that it was downgrading the country’s economic forecast for 2022 and 2023.

It is against this backdrop that the SNB is holding its final meeting of the year. Economists expect that the SECO estimates and the Omicron variant will push the SNB to sound dovish. 

Another key catalyst will be the performance of the Swiss franc. The USD/CHF has crashed by more than 1.27% from the highest point in November. At the same time, the closely-watched EUR/CHF has collapsed to the lowest level since 2015. 

The USD/CHF and EUR/CHF pairs will also react to the Fed and ECB decisions. While the Fed is expected to sound a bit hawkish on Wednesday, the ECB will be a bit cautious.

USD/CHF forecast

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USD/CHF

The daily chart shows that the USD/CHF pair has risen in the past three straight days. In the past few weeks, it has formed an ascending channel that is shown in black. The pair is also slightly above the 25-day and 50-day moving averages while the MACD has moved slightly above the neutral level.

Still, the pair has formed what looks like a bearish flag ahead of the Fed and SNB decisions. Therefore, there is a likelihood that the pair will resume the downward trend this week since the hawkish Fed situation has already been priced in.

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