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• USD/CHF attracts some intraday buyers after the SNB announced its policy decision.
• The expected 25 bps lift-off and the lack of fresh hawkish signals weigh on the CHF.
• A modest USD uptick remains support, albeit the Fed rate-hike uncertainty caps gains.

The USD/CHF pair rallies nearly 50 pips after the Swiss National Bank (SNB) announced its policy decision and touches a fresh daily, around the 0.8950 region during the early European session on Thursday.

The Swiss Franc (CHF) weakens across the board after the SNB, as was widely expected, decided to increase its benchmark sight deposit interest rate by 25 bps, from 1.50% to 1.75%. This marks the fifth successive interest rate hike, though the lack of fresh hawkish signals reaffirms expectations that the SNB will be on hold for at least the rest of the year. Apart from this, a modest US Dollar (USD) strength prompts some intraday short-covering around the USD/CHF pair.

The USD uptick, however, lacks bullish conviction in the wake of the uncertainty over the Federal Reserve's (Fed) rate hike path. In fact, a duo of Fed officials on Wednesday called for more patience on rate hikes to allow the tightening delivered so far to filter through the economy. Moreover, Fed Chair Jerome Powell sounded less hawkish during his testimony before the House Financial Services Committee and said that it may make sense to raise rates at a more moderate pace.

Powell, however, added that the fight against inflation still has a long way to go and despite a pause in interest rate hikes last week, officials agreed borrowing costs would likely need to move higher. This, in turn, helps limit the downside for the USD and acts as a tailwind for the USD/CHF pair. That said, it will still be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any further gains.
 

Technical levels to watch

USD/CHF

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