USD/CHF spikes above 0.9050 to highest level since June 13 in reaction to unexpected SNB pause

• USD/CHF extends its recent bullish trajectory and jumps to a new multi-month high on Thursday.
• The SNB defies expectations and keeps its reference rate unchanged, weighing on the CHF.
• The Fed-inspired rally in the USD remains a support for the strong intraday move.

The USD/CHF pair has seen aggressive buying during the early stages of the European session on Thursday and has reached its highest level since mid-June, after the Swiss National Bank (SNB) announced its monetary policy decision. The pair is currently trading around 0.9050, with the bulls now looking to extend momentum beyond a technically significant 200-day simple moving average (SMA) before opening new positions.

The Swiss franc (CHF) weakens broadly after the SNB decided to keep the official interest rate unchanged at 1.75%, defying expectations of a final 25 basis point hike in September. In the statement accompanying the decision, the central bank says that the tightening of monetary policy in recent quarters is counteracting inflationary pressures, suggesting that the cycle of rate hikes may have come to an end. This, along with the underlying bullish sentiment around the US Dollar (USD) continues to act as a tailwind for the USD/CHF pair.

In fact, the DXY Dollar Index, which measures the Dollar against a basket of currencies, is again approaching the highs of the last six months and continues to boost the USD/CHF pair. On Wednesday, the Federal Reserve (Fed) decided to keep interest rates unchanged at their highest level in 22 years, between 5.25% and 5.5%, although it warned that persistent inflation is likely to bring at least one more increase of interest rates in 2023. Additionally, policymakers now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024, down from four previously forecast.

This, in turn, reaffirms the “higher for longer” narrative and continues to push US Treasury yields higher. In fact, the rate-sensitive two-year US government bond yield has hit its highest level since July 2006. Additionally, the 10-year Treasury yield has hit a 16-year high, following supporting the Dollar and helping the USD/CHF pair to extend its strong upward trajectory of the last two months. That said, a softer risk tone could benefit the safe-haven CHF and keep any further advances at bay.

Market participants now look to the US economic calendar, with the release of the usual weekly initial jobless claims, the Philadelphia Fed manufacturing index and existing home sales data later in the day. during the American session. This data, together with US bond yields, should influence the dynamics of the Dollar and give some momentum to the USD/CHF pair. Traders will follow the risk sentiment to take advantage of some short-term opportunities. Meanwhile, the fundamental backdrop suggests that the path of least resistance remains to the upside.

USD/CHF technical levels to watch