USD/CHF Forecast: SNB to Pursue Price Stability Objective Independently

USD/CHF Forecast: SNB to Pursue Price Stability Objective Independently

  • SNB Chairman Jordan championed central bank independence amid political pressure to slow down.
  • SNB looks set to raise rates further after the last 75bps hike.
  • The SNB favors a stronger franc as it reduces imported inflation.

Today’s USD/CHF forecast is bearish as the franc strengthens on SNB Chair Jordan’s hawkish remarks. The market awaits FOMC minutes today.

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“Central banks need to resist political pressure to slow monetary policy tightening as they hike interest rates to fight resurgent inflation. Risks to central bank independence are real and present around the globe, also in Switzerland. With rising debt servicing costs, political pressure to postpone, slow down or limit the tightening could arise,” Swiss National Bank Chairman Thomas Jordan said on Tuesday.

In an effort to combat Swiss inflation, which has risen to its highest level in over 30 years, the SNB this month increased its policy interest rate by 75 basis points to 0.5%. The Swiss Constitution guarantees the SNB’s independence. Therefore, the bank’s ability to pursue its price stability objective is not currently constrained.

According to data released on Monday, the amount of commercial bank cash held overnight at the Swiss National Bank decreased last week by 30 billion Swiss francs ($30.07 billion), demonstrating how the central bank is tightening monetary policy through decreasing market liquidity.

It’s also probable that the SNB sold some of its foreign currencies to maintain the Swiss franc’s value as it declined last week, which has helped to contain the scope of imported inflation and is pushing the currency higher this week.

USD/CHF key events today

Investors are awaiting the US PPI report. The Producer Price Index (PPI) tracks changes in the cost of manufactured goods. There will also be the FOMC meeting minutes which will provide in-depth insights into the FOMC’s position on monetary policy.

USD/CHF technical forecast: Bears return stronger at parity

USD/CHF forecast

The 4-hour chart shows the price trading close to the 30-SMA and RSI near 50. Although the bullish trend remains intact, bears have shown strength and are prepared for a break below the 30-SMA. The price found solid resistance at the 1.0000 key psychological level, where bears took over.

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Bears can only reverse the trend if they break below the 0.9950 support level and the 30-SMA. That would mean a collapse to the 0.9847 support level. However, if bulls maintain their strength, the price might break above parity for a new higher high.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.