USD/CHF surges to two-week high above 0.9800 post-SNB decision

• USD/CHF catches aggressive bets and jumps to a two-week high following the SNB policy decision.
• A 75 bps hike was already priced in and weighed on the CHF in the absence of any hawkish surprise.
• Bets for more aggressive Fed rate hikes continue to lift the USD and remain supportive of the move.

The USD/CHF pair spikes to a two-week high after the Swiss National Bank (SNB) announced its monetary policy decision. The pair breaks above the 100-day SMA barrier during the early European session and is currently trading around the 0.9800 region.

As was widely expected, the SNB hiked its benchmark sight deposit interest rate by 75 bps to 0.50% from -0.25% previous. This comes on the back of a surprise 50 bps increase in the June meeting, which was the first hike since September 2007. The Swiss franc, however, weakens across the board in the absence of a hawkish surprise. Apart from this, relentless US dollar buying provides a strong lift to the USD/CHF pair.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, rose to a fresh 20-year peak amid a more hawkish stance adopted by the Federal Reserve. It is worth noting that the Fed raised interest rates by another 75 bps on Wednesday and signalled more aggressive rate increases at its upcoming meetings. Apart from this, technical buying above the 100 DMA barrier remains supportive of the move.

The pair will soon reach resistance in the 0.9830s from a trendline drawn connecting the June and September 2022 highs which is also the upper boundary of a falling channel the pair has been oscillating in for most of the year. A clear break above the channel line and daily open or close above would be required to provide confirmation of a breakout and fresh impetus to the uptrend. Such a move, however, would then probably lead to an extension higher to a target, first at parity, and then 1.0080, which is the 61.8% Fibonacci extension of the move inside the channel prior to the breakout – the usual method used by analysts for forecasting such extensions. 

Investors now look forward to the post-meeting press conference, where comments by Thomas Jordan, Chairman of the Governing Board of the SNB, should provide a fresh impetus to the USD/CHF pair. Later during the early North American session, traders will take cues from the release of the US Weekly Initial Jobless Claims data.

Technical levels to watch