In contrast to other central banks, SNB has kept interest rates unchanged at zero. Gains in the US dollar are limited by waning consumer optimism and cautious expectations from the Federal Reserve. Widespread macroeconomic uncertainty is added by the escalations in the Middle East and the possibility of US engagement. After two days of losses, the USD/CHF gained ground and was trading at 0.8310 during Monday’s Asian hours. As short positions on the Swiss franc continue to put pressure on the currency pair, it is finding upward support. The Swiss National Bank has taken a different approach than other major central banks, which has caused market expectations to be pessimistic about its future. In September, the SNB kept its key interest rate at 0%. The dovish outlook was further reinforced by Vise Chairman Martin’s statement that no adjustment is presently necessary. He cited low and stable inflation as proof that the Swiss economy is performing extremely well, as well as negligible spillover concerns.
Analysts reiterate that USD/CHF remains in a consolidation phase, noting that in their most recent narrative from October 2, spot at 0.8310, they had highlighted that USD “has likely entered a range-trading phase between 0.8245 and 0.8365.” They add that although USD “traded in a relatively quiet manner over the past couple of days, we will maintain our view for now,” keeping the short-term outlook anchored within that defined range over the next one to three weeks. A fall in the value of the US dollar due to gloomier economic sentiment at home could limit further advances for the USD/CHF pair. The consumer sentiment index at the University of Michigan fell to 46.3 in October from 48.1 in September, which was below market expectations of 47.6 and a clear indicator of the slump. From 24.4% last week to 17.7% this month, the CME FedWatch tool shows that the likelihood of a rate hike of 25 basis points or more has decreased.
However, for the Federal Reserve’s December meeting, market players are heavily pricing in an 84.1% chance of a rate hike. Concerns about the oil market have reemerged in the wake of recent geopolitical events in the Middle East, so traders may exercise prudence. A second fatal assault on Riyadh’s international airport has prompted US President Donald Trump to express his interest in potentially joining Saudi Arabia’s military war in Yemen against the Houthi terrorists, who are backed by Iran. The USD/CHF pair is trading above the short- and medium-term Exponential Moving Averages on the daily chart, maintaining a constructive bullish bias above 0.8310. There appears to be a stacked demand zone that is absorbing pullbacks, since the nine-day EMA is just below the market and the 50-day EMA is lower.
With price maintaining its position above its immediate exponential moving average support, further higher is possible, as the 14-day Relative Strength Index hovers around 60, suggesting strong but not overstretched momentum. If a more extensive correction were to occur, preliminary support would be found at the nine-day exponential moving average close to 0.8307, and a deeper floor at the fifty-day EMA close to 0.8196. Given the absence of any close technical resistance levels in this dataset, it seems likely that the pair will continue to rise as it defends these EMAs. Traders, however, would want to keep an eye on the chart for the next upward reference points, such as the upcoming swing highs.
