USD/CHF aims up as SNB holds rates unchanged as bull’s eye 0.9100

• USD/CHF gains to 0.9038 after the SNB surprises markets by keeping rates at 1.75%, with the market pricing in a hike to 2%.
• The Fed’s hawkish hold and upward revision of the Federal Funds Rates for 2024 underpin the US Dollar strength.
• With the interest rate differential favoring the USD, a sustained break above the 200-DMA could see USD/CHF testing the YTD high above 0.9400.

The Swiss Franc (CHF) lost ground against the US Dollar (USD) on Thursday after the Swiss National Bank (SNB) surprisingly decided to hold rates unchanged, surprising the markets, which priced in a rate hike to 2%. Hence, the USD/CHF edges higher by 0.59%, exchanging hands at 0.9038.

Swiss Franc weakens on an unexpected decision by the Swiss National Bank

In the early European session, the SNB unexpectedly held rates at 1.75% as money market futures estimated a 25 bps rate hike. Although it was a dovish surprise, the Swiss National Bank commented that further tightening may be necessary to ensure price stability over the medium term.

The central bank updated its inflation forecasts for 2023 and 2024, seeing the Consumer Price Index (CPI) at 2.2%. Even though it’s just within the price stability range, the SNB foresees inflation to rise to 1.9% in 2025.

Aside from this, the aftermath of the US Federal Reserve’s hawkish hold also weighed on the Swiss Franc (CHF). Market players were surprised by the Fed’s upward revision to the Federal Funds Rates (FFR) above 5% in 2024, compared to June’s 4.6% projection. That’s the primary driver of price action in the financial markets, which sent US equities tumbling, US bond yields rising, and the Greenback holding its ground against most G8 currencies.

US Treasury bond yields had extended their gains, with the US 2-year bond yield, the most sensitive to short-term interest rate adjustments, at 5.146%, after reaching a multi-year high of 5.202%.

That said, the USD/CHF would rely on an interest rate differential between the US and Switzerland, thus favoring the Greenback. Therefore, the USD/CHF could continue to trend up, and a clear break above the 200-DMA could sponsor a test of the year-to-date (YTD) high above the 0.9400 mark.

USD/CHF Price Analysis: Technical outlook

USD/CHF resumed its uptrend, conquering the 0.9000 threshold after the SNB decision. On its way north, the pair reached a daily high of  0.9078 but retraced toward the 200-day moving average (DMA) at 0.9033. Daily close above the latter, a move towards the May 31 swing high of 0.9147 is on the cards. Otherwise, expect a consolidation within the 0.9000/0.9040 area unless it bears drag prices below the 0.9000 mark.