USD/CHF analysis: forms bearish pattern ahead of SNB, FOMC

The USD/CHF exchange rate moved sideways on Monday morning as focus among investors shifted from the upcoming Swiss National Bank (SNB) and Federal Reserve interest rates decisions. It rose to a high of 0.8845, a few points above this month’s low of 0.8757.

Swiss National Bank rate decision

The USD to CHF exchange rate wavered on Monday morning ahead of the upcoming SNB decision. 

Economists polled by Reuters expect the bank to deliver another interest rate cut this week as concerns about the Swiss franc's strength continue. 

The Swiss franc has risen by almost 4% from its lowest point this year against the US dollar. It has, however, softened a bit against the euro, with the EUR/CHF pair rising to a high of 0.9500, its highest level since July last year. 

The SNB will also cut rates because Swiss inflation has continued falling in the past few months. Data from the statistics agency showed that the headline Consumer Price Index (CPI) dropped to 0.3% in February from 0.6% a month earlier. 

The Swiss CPI has been in a downward trend after peaking at 3.5% in 2022. There are also signs that the country’s inflation will drop below zero in the next few months. 

Read more: USD/CHF forecast: Here’s why the Swiss franc is surging

As such, the SNB hopes that these rate cuts will help to incentivize spending in the country and lift prices higher. 

Odds of the SNB cut are evident in the Swiss government bonds. Data shows that the ten-year yield of Swiss government bonds dropped to 0.677% down from this month’s high of 0.90%. The five-year yield dropped to 0.56% from the YTD high of 0.637%.

Federal Reserve interest rate decision

The USD/CHF exchange rate will also react to the upcoming Federal Reserve interest rate decision. 

Economists expect the Federal Reserve to leave interest rates unchanged at 4.50% for the second consecutive meeting. 

In its last meeting, the bank signaled that it would deliver just two interest rates this year. 

That meeting, however, happened before Donald Trump restarted his trade war. Since that meeting, Trump has gone to a serious trade conflict with countries like Mexico, Canada, and China. Trump has also hinted that he will implement reciprocal tariffs in April. 

These tariffs will likely lead to a slow US economy, with the FedNow data showing that the economy will contract by 2.4% in this first quarter. 

US bond yields have also dropped in the past few months. The 10-year yield dropped from the year-to-date high of 4.80% to 4.30%. Similarly, the 30-year yield has moved from 5% to 4.61%.

The US and Swiss bond yields mean that investors are borrowing the cheap franc and investing in the US. 

USD/CHF technical analysis

The daily chart shows that the USD to CHF exchange rate has retreated in the past few months. It has dropped from a high of 0.9200 this year to the current 0.8845. 

The pair has dropped to the 50% Fibonacci Retracement level. It has also formed a bearish flag chart and a rising wedge. 

The USD/CHF pair is about to form a mini death cross as the 50-day and 100-day moving averages cross each other. 

Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being at 0.8762. A break below that level will point to further downside, potentially to the 61.8% retracement at 0.8590.