USD/CHF forecast: signal ahead of the Fed and SNB rate decisions

Written by

Written on Sep 19, 2023

Reading time 3 minutes

The USD/CHF pair has been in a strong uptrend in the past few weeks.
The Federal Reserve is expected to have a hawkish pause in its Wednesday meeting.
The SNB will deliver another rate hike on Thursday this week.

The USD/CHF exchange rate has been in a strong bullish trend in the past few weeks. It was trading at 0.8955, the highest level since July 6th. It has jumped by more than 4.8% from the lowest level this year.

SNB and Federal Reserve decision

The USD/CHF pair will be in the spotlight in the next few weeks as investors reflect on the rising oil prices and the upcoming Federal Reserve and Swiss National Bank (SNB) decision. The two banks will deliver their decisions on Wednesday and Thursday, respectively.

These meetings come at an important time for the global economy. In a report on Tuesday, the OECD, a club of wealthy countries, warned that the economy will continue slowing this year.

At the same time, the price of crude oil has been in a strong bullish trend. Brent, the global benchmark, soared to $95 while the West Texas Intermediate (WTI) has moved to over $93. Therefore, there is a likelihood that the recent drop of inflation will ease in the coming months.

Economists expect the Fed to diverge with the European Central Bank (ECB), which hiked rates by 0.25% last week. As I wrote here, analysts believe that the Fed will decide to leave rates unchanged and point to more hikes in the future.

Data published last week showed that the US inflation rebounded in August. Precisely, the rate jumped to 3.7% in August after rising to 3.2% in the previous month.

The Swiss National Bank, on the other hand, is also expected to push interest rates higher once more. Economists have priced in an increase of 0.25%, which will push them to a multi-year high of 2%. Swiss inflation stood at 1.5% in August.

USD/CHF technical analysis

The daily chart shows that the USD to CHF exchange rate has been in a strong bullish trend in the past few weeks. It has soared from a low of 0.8548 in July to almost 0.900. As it jumped, the pair rose above the important resistance level at 0.8816, the lowest level on May 4th.

The pair has formed an ascending channel shown in orange. It has also moved above the 23.6% Fibonacci Retracement level. Also, the pair has risen above the 50-day and 100-day exponential moving averages (EMA).

Therefore, the outlook for the pair is bullish, with the next key level to watch being at the 38.2% retracement point at 0.9200. The alternative is where the USD/CHF pair retreats and retests the support at 0.8816.