USD/CHF powers December highs near 0.9300 as analysts expect more hawkish Fed plus signs of SNB intervention

• USD/CHF surged 0.9% on Monday from under 0.9200 to current levels around 0.9270 and is eyeing December highs near 0.9300.
• The dollar was strong on Monday as market participants revise their Fed calls towards more aggressive hikes in 2022.
• But CHF also weakened substantially in wake of a jump in Swiss sight deposits that could indicate SNB intervention.

USD/CHF hit its highest levels in nearly four weeks on Monday after breaking convincingly above the 0.9250 level for the first time since mid-December. It’s been a broadly decent day for the buck as various banks/analysts revise their Fed forecasts in wake of last week’s hawkish Fed minutes and US December jobs report to expect as many as four rate hikes in 2022. But that doesn’t explain the full extent of the upside on Monday, which has seen USD/CHF surge from opening levels to the south of 0.9200 to current levels around 0.9270, an on-the-day gain of around 0.9%.

That surge has seen USD/CHF break to the north of a bullish trend channel that had been constraining the price action over the past week or so. It also marks a clean break back above the pair’s 21, 50 and 200DMAs, all of which reside between the 0.9160-0.9210 area. Technically speaking, a test of the December high at just under 0.9300 now seems highly likely and if that level is broken, eyes will turn to the next area of resistance around 0.9375, a double top of the September/November highs.

The Swiss franc’s near 1.0% depreciation on the day versus the US dollar means it is by far and away the worst performing G10 currency. Some traders attributed the weakness to weekly Swiss sight deposit data released early during Monday’s European session. Total sight deposits jumped to CHF 724.631B from CHF 722.771B a week earlier, a sign that the SNB may have stepped up its forex interventions to weaken CHF last week.

As noted by analysts at Reuters, “the SNB… has long used foreign currency purchases and negative interest rates as the foundation of its expansive monetary policy… (and) increases to sight deposits - cash which commercial banks store with the central bank overnight - are normally seen as a proxy for foreign currency purchases”. But economists cautioned not to read too much into the data, as it is usual to see lower deposits towards the end of the year before  jump in January.