- Swiss franc weakened even despite risk aversion.
- Divergence between the Swiss National Bank with the rest hits the CHF.
- USD/CHF targets 1,000, with support at 0.9890.
The USD/CHF continues with the consistent rally and rises for the 20th time on Tuesday, of the last 22 days. The pair reached as high as 0.9974, the highest level since November 2019. The dollar remains firm and looks closely at the parity level. Despite all the overbought indicators, the pair is still looking for a new equilibrium level.
The Swiss franc is showing weakness on several fronts these days and it is also reflected in the rise of the EUR/CHF that climbed more than 100 pips in two days, accumulating a rebound of 300 pips adding up last week. The cross broke above 1.0500, and is at the highest since February. This advance adds to the overall weakness of the franc.
The Monetary policy divergence is a key factor explaining much of the franc’s weakness. While the Swiss National Bank (SNB) is expected to keep its accommodative policy unchanged, there is talk at the European Central Bank (ECB) of a possible rate hike. The contrast with the Federal Reserve is even greater, though less novel.
SNB officials continue with a tone “dovish” in opposition to the words in favor of adjustments by members of the Governing Board of the ECB. In turn, inflation in Switzerland is at 2.5%, well below the figures for the Eurozone and the US.
Looking ahead to the next few hours, the economic calendar appears light in the US and the presentation of Fed officials (Barkin, Waller, Kashkari and Mester) and Joe Biden on inflation stands out. There will also be a 3-year debt placement in the US.
Technical levels
Source: Fx Street
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