USD/CHF down 250 pips amid SNB rate hike and weaker USD

• Swiss franc among top performers after SNB surprise rate hike.
• USD/CHF extends slide amid risk aversion and a weaker dollar.
• EUR/CHF heads for the lowest close in two months.

The Swiss franc is having the best day in months on Thursday on the back of an unexpected rate hike from the Swiss National Bank. The USD/CHF dropped further during the American session and reached the lowest level in ten days, under 0.9700.

From a stronger CHF to a weaker USD

The Swiss franc jumped across the board earlier on Thursday following a 50 basis points rate hike from the Swiss National Bank from -0.75 to -0.25. Also, comments about the exchange rate, with references to the Swiss franc not being “highly valued”, triggered the CHF’s rally. “The updated forecasts don’t suggest any rush to tighten.  However, the swaps market is pricing over 350 bp of tightening over the next 12 months that would see the policy rate peak near 3.25% vs. 1.25-1.50% at the start of this week,” explained analysts at BBH.

During the American session, the driver in the USD/CHF slide was a weaker US dollar. The greenback lost momentum despite risk aversion and amid a pullback in US yields. The USD/CHF is trading at 0.9680/85, at the lowest level in ten days, down more than 250 pips for the day. The move faces a support area at 0.9640 and then the May low at 0.9540.

The pair is back under the 20-day moving average and has made a sharp reversal after being rejected again from above 1.0000. The greenback needs to recover 0.9725 initially to alleviate the bearish pressure. Above the next resistance is seen at 0.9800 and 0.9870.

The EUR/CHF is falling more than 200 pips. It bottomed at 1.0127, the weakest since April 13 and then rebounded modestly to 1.0175. Below 1.0125, attention would turn to the April low of 1.0085.

Technical levels