USD/CHF cheers on SNB rate cut

• USDCHF rises rapidly after SNB lowers interest rates to 1.25%.

• Oversold signals favor the bulls; more upside needed for a positive outlook.

USDCHF turned swiftly up to test its 200-day simple moving average (SMA) at 0.8890 after the Swiss National Bank (SNB) cut interest rates by a quarter percentage point for the second consecutive meeting despite some investors estimated no changes in borrowing costs.

The oversold signals coming from the RSI and the stochastic oscillator suggest that the rebound that took place today near the support line at 0.8840 has probably just started.

However, investors may preserve some caution until the 200-day SMA, which switched from support to resistance, gives the green light towards the 20-day SMA at 0.8970. The 23.6% Fibonacci retracement of the December-June upleg could be another hurdle near 0.9012 and the pair will have to claim it in order to reach the upper band of the short-term bearish channel at 0.9065. Even higher, the focus could shift to the descending trendline drawn from November 2022 at 0.9135.

Note that the gap between the 20- and 50-day SMAs continues to grow following the negative crossover between the lines. This questions the case of a bullish trend reversal.

Should the bears breach the channel’s floor at 0.8840, the sell-off could expand towards the 50% Fibonacci mark of 0.8770. Running lower, the price could stabilize near 0.8730 before meeting the 61.8% Fibonacci of 0.8670.

In a nutshell, USDCHF has the potential to start a bullish course in the coming sessions, though the outlook may not switch to bullish until the price breaks successfully above 0.9135.