USD/CHF retreats from YTD high to 0.9400 after Fed’s Powell conference

• In the North American session, the Swiss franc gains vs. the greenback, up some 0.06%.
• The Fed projects the Federal Funds Rate at 1.9% by the end of 2022.
• USD/CHF Price Forecast: Above 0.9373, the bias is upwards; otherwise, a move downwards is on the cards.

The USD/CHF snaps four consecutive days of gains, down 0.12%, in the North American session, as the Federal Reserve hiked rates 25 basis points, from 0.25% to 0.50%, amid a risk-on market mood. The USD/CHF slides from 0.9472 to 0.9401 at the time of writing.

Following the Federal Reserve’s first rate hike in three years, the financial market mood stays positive. US equity indices recovered from losses at the headline and following Fed’s Chief Jerome Powell presser, which appeared to be more dovish than the statement.

The greenback remains soft, losing almost 0.80% in the session, sitting at 98.36, while US Treasury yields are practically flat, with the 10-year T-benchmark note at 2.217%, after reaching 2.246%.

Summary of remarks of Fed monetary policy statement

The Federal Reserve stated that inflationary pressures remain high, caused by supply difficulties, the Covid-19 pandemic, and high oil and energy prices. Furthermore, the Russia-Ukraine conflict spurred a steeper move in oil, and Fed policymakers commented that the implications of the conflict are highly uncertain and would create additional upward pressure on inflation.

That said, policymakers worried about the actual scenario signaled the necessity of rate hikes to tame inflation, as reflected by the dot-plot, where Fed Governors expect at least seven increases to the Federal Funds Rate this year as the median forecasts rates to end around 1.90% in 2022.

Labor market-wise, Fed members foresaw the unemployment rate would hit 3.5% by 2022 and 2023. Regarding the balance sheet reduction, also known as Quantitative Tightening (QT), officials would expect to begin reducing it at a coming meeting.

USD/CHF Price Forecast: Technical outlook

Overnight, the USD/CHF seesawed around the 0.9400 area, ahead of the Federal Reserve meeting. However, once Fed’s monetary policy decision crossed the wires, the pair moved, with the USD/CHF appreciating and reaching a new YTD high at 0.9460, retracing afterward to pre-Fed levels.

The USD/CHF bias is upwards, though downside risks remain unless USD/CHF bulls hold their reins above the November 24, 2021, high at 0.9373, previous resistance-turned-support. In that event, March 15 high at 0.9431 would be the first resistance, followed by April 1, 2021, high at 0.9472, which would expose the 0.9500 mark once cleared.

On the flip side, the USD/CHF first support would be 0.9400. Breach of the latter would expose 0.9373, followed by January 31 resistance-turned-support at 0.9343 and the 0.9300 psychological level.