USD/CHF holds steady near two-month tops, just below mid-0.9200s post-SNB

• USD/CHF reverses an early dip and turn positive for the fifth consecutive session.
• The pair moved little after the SNB announced its latest monetary policy decision.
• The risk-off mood, a modest USD pullback might keep a lid on any runaway rally.

The USD/CHF pair held steady near two-month tops, just below mid-0.9200s and had a rather muted reaction to the latest SNB monetary policy update.

Following an early dip to the 0.9215 region, the pair caught some fresh bids and moved into the positive territory for the fifth consecutive session on Thursday. The USD/CHF pair moved little after the Swiss National Bank (SNB) announced its latest monetary policy decision and left the policy rate unchanged at -0.75%.

The accompanying policy statement reiterated that the Swiss franc is highly valued and that the SNB is ready to step up intervention in the FX market as necessary. The statement further revealed that the inflation outlook is subject to usually high uncertainty. The SNB now sees inflation at -0.6% in 2020, at +0.1% in 2021 and at +0.2% in 2022.

The fact that the SNB reaffirmed its pledge to intervene in the market and limit any significant appreciation in the domestic currency was seen as a key factor lending some support to the USD/CHF pair. However, a combination of factors might hold investors from placing aggressive bullish bet and cap any strong gains.

The prevalent risk-off environment – as depicted by a negative trading sentiment around the equity markets – extended some support to the Swiss franc’s safe-haven status. The anti-risk flow was reinforced by a fresh leg down in the US Treasury bond yields, which prompted some US dollar profit-taking from two-month tops.

The lack of any strong follow-through buying warrants some caution before positioning for any further appreciating move. That said, the overnight sustained move beyond the 0.9200 mark favours bullish traders. Hence, some follow-through buying will set the stage for an extension of this week’s positive momentum towards reclaiming the 0.9300 mark.

Technical levels to watch