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  • USD/CHF gained strong follow-through traction for the second consecutive session on Thursday.
  • The Fed’s hawkish tilt continued underpinning the USD and remained supportive of the move up.
  • A weaker risk sentiment, the latest SNB policy decision did little to hinder the ongoing momentum.

The USD/CHF pair continued scaling higher through the early European session and shot to the 0.9125-30 region, or the highest level since May 6 in the last hour.

The pair built on the previous day’s momentum beyond the very important 200-day SMA and gained strong follow-through traction for the second consecutive session on Thursday. The Fed’s sudden hawkish tilt on Wednesday pushed the US dollar to near two-month tops, which, in turn, was seen as a key factor that provided a goodish lift to the USD/CHF pair.

It is worth recalling that the Fed signalled that it might raise interest rates at a much faster pace than anticipated earlier. The so-called dot plot indicated two rate hikes by the end of 2023 as against March’s projection for no increase until 2024. Adding to this, seven members pencilled in a rate hike or more in 2022 as compared to four in March.

The USD bulls seemed rather unaffected by a modest decline in the US Treasury bond yields. Even a sharp pullback in the equity markets, which tends to underpin demand for the safe-haven Swiss franc, also failed to hinder the ongoing positive move. The USD/CHF pair maintained its bid tone and moved little after the SNB announced its policy decision.

As was widely expected, the SNB left the sight deposit interest rate unchanged at -0.75%. The Swiss National Bank reiterated that the CHF remains highly valued and showed readiness to intervene in the FX market it needed. The SNB also upgraded its inflation forecast through 2023, though did little to provide any meaningful impetus to the USD/CHF pair.

Market participants now look forward to the US economic docket – featuring the release of the Philly Fed Manufacturing Index and the usual Initial Weekly Jobless Claims. This, along with the US bond yields, might influence the USD. Apart from this, the broader market risk sentiment could produce some short-term trading opportunities around the USD/CHF pair.

Technical levels to watch