USD/CHF reclaims 0.9000 mark for the first time since late June, ahead of SNB policy meeting

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• USD/CHF prolongs its two-month-old uptrend and climbs to its highest level since late June.
• The Fed’s hawkish outlook, rising US bond yields underpin the USD and remain supportive.
• Investors now look to the SNB policy meeting for some impetus ahead of the US macro data.

The USD/CHF pair touches its highest level since late June during the Asian session on Thursday, with bulls now looking to build on the momentum further beyond the 0.9000 psychological mark.

The US Dollar (USD) builds on the previous day’s hawkish Federal Reserve (Fed)-inspired recovery from over a one-week low and has now moved well within the striking distance of a six-month high, which, in turn, acts as a tailwind for the USD/CHF pair. The US central bank, as was anticipated, decided to leave the benchmark federal funds rate unchanged on Wednesday, though signalled one more rate hike by the end of this year. In fact, the so-called ‘dot-plot’ forecasted rates to peak at 5.5% to 5.75% in 2023. Adding to this, policymakers now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four rate cuts projected previously.

This reaffirms a higher-for-longer narrative and pushes the yield on the rate-sensitive two-year US government bond to a 17-year high. Furthermore, the benchmark 10-year yield has climbed to its highest since late 2007, which continues to boost the Greenback and assists the USD/CHF pair to prolong its strong upward trajectory witnessed over the past two months or so. With the latest leg up, spot prices have now rallied around 450 pips from the July swing low, though some follow-through buying and acceptance above the 0.9000 mark is needed to support prospects for additional gains. The market focus now shifts to the Swiss National Bank (SNB) policy meeting, due this Thursday.

The current market pricing indicates a greater possibility that the SNB will hike interest rates for the sixth successive time in SSeptember That said, the recent slew of weak real economy data, sub-2% readings on the headline and core inflation, and the strengthening of the Swiss Franc (CHF) against its European counterpart might force the central bank to limit any further tightening. Hence, the accompanying monetary policy statement will be scrutinized for cues about the future rate-hike path and provide some impetus to the USD/CHF pair.

Later during the early North American session, the US economic docket – featuring the usual Initial Weekly Jobless Claims, Philly Fed Manufacturing Index and Existing Home Sales data – will also be looked upon for short-term opportunities. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of the USD bulls and suggests that the path of least resistance for the USD/CHF pair is to the upside. Hence, any immediate market reaction to a more hawkish SNB is more likely to be seen as an opportunity for bullish traders and remain limited.

Technical levels to watch