USD/CHF remains near two-week lows, looks vulnerable around 0.9050

• USD/CHF came under renewed selling pressure on Monday amid modest dollar weakness.
• The surprise rate hike by the Swiss National Bank has contributed to the intraday selling of the CHF.
• The Fed’s dovish expectations capped the dollar’s losses and gave it support amid a positive risk tone.

The pair USD/CHF it found fresh supply on the first day of a new week and pulled back to approach a nearly two-week low hit on Friday. However, the pair managed to trim some of its intraday losses and was last seen trading above 0.9650 during the early American session.

The Swiss franc continued to receive support from a surprising reversal of stance by the Swiss National Bank (SNB), which joined other major central banks in 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. This coupled with the onset of fresh US dollar selling put some downward pressure on the USD/CHF pair.

Investors were comforted by the fact that the Fed forecast that the interest rate would drop to 3.4% in 2024 and 2.5% in the long term, from the 3.8% forecast for 2023. This was considered a key factor behind the recent and sharp drop in US Treasury bond yields, which kept dollar bulls on the defensive. That said, expectations that the US central bank will maintain its aggressive monetary policy tightening path should act as a tailwind for the greenback.

Aside from this, a generally positive tone around equity markets could undermine the CHF haven and lend some support to the USD/CHF pair. Investors may also be reluctant to make aggressive bets amid a lack of relevant economic data and relatively thin trading volume due to the US holiday. Therefore, it is prudent to wait for a convincing break below 0.9600 before positioning for any further downside moves.

Technical levels