USD/CHF continues previous day’s sharp losses and falls to two-week lows

• USD/CHF witnessed selling for the third day in a row and fell to a two-week low on Friday.
• The surprise 50 basis point rate hike by the Swiss National Bank continued to support the CHF and exerted some pressure.
• The bulls seemed unaffected by a nice pickup in dollar demand and the boost in risk appetite.

The pair USD/CHF found fresh supply near the 0.9710 area on Friday and fell to a two-week low during the European session. The pair is now trading above 0.9630, down 0.35% on the day.

The Swiss National Bank (SNB) joined other major central banks in tightening monetary policy, surprisingly raising interest rates by 50 basis points on Thursday. In the monetary policy statement, the SNB left the door open for further rate hikes to counter rising inflationary pressures, which continued to support the Swiss franc. This, in turn, was seen as a key factor putting downward pressure on the USD/CHF pair for the third day in a row.

The ongoing decline did not seem to be affected by the appearance of new purchases around the US dollar, reinforced by expectations that the Federal Reserve will maintain its tightening policy to curb rising inflation. Not even the risk boost, which tends to steer flows away from the safe haven CHF, was able to support the USD/CHF pair. With the latest leg down, spot prices have retraced 430 pips from near the all-time high, around the 1.0050 area touched on Wednesday.

A bit of selling below the 0.9600 level would be seen as a new trigger for bearish traders and would set the stage for further short-term losses for the USD/CHF pair. Market participants now await the US economic docket, with industrial production and capacity utilization rate. This coupled with dollar price dynamics and overall market risk sentiment could give the USD/CHF pair a significant lift ahead of an extended weekend in the US.

Technical levels