The USD/CHF exchange rate drifted upwards ahead of the upcoming Swiss National Bank (SNB) and the Federal Reserve interest rate decisions. The pair jumped to a high of 0.8840, which was much higher than the YTD low of 0.8333.
SNB and Fed decisionsThe USD/CHF pair will be in the spotlight this week as investors focus on key central bank decisions from the SNB and the Federal Reserve. The two will deliver their decisions on Wednesday and Thursday, respectively.
These two meetings will set the tone for what to expect in the next few months. In the US, the Federal Reserve will likely provide more hints on when it will start cutting interest rates.
The recent economic numbers have painted a mixed picture about the American economy. A report published last week revealed that inflation was a big thorn in the flesh for the Federal Reserve.
The headline Consumer Price Index (CPI) rose by 3.1% in February while core CPI soared by 3.8%. Further, wholesale prices also continued rising during the month.
At the same time, the labor market is still tight, with the unemployment rate sitting at 3.9%. The economy created more than 250k jobs in February while wage growth is rising at a faster pace than inflation.
Therefore, the Fed may come up with a more hawkish statement than expected. In this, it will likely signal that it will deliver about two rate cuts this year. In the previous meetings, it signalled that it would deliver three cuts.
The Fed could justify the rate cuts because the US economy is slowing. Consumer confidence has plunged while factory and durable goods orders has retreated recently.
Elsewhere, in Europe, the Swiss National Bank is also expected to leave rates unchanged. Recent numbers showed that the country’s inflation came in at 1.2% in February. It has been in a constant drop after peaking at 3.5% after the pandemic.
The SNB may likely signal that a rate cut will happen in the next meeting since inflation remains below its target.
USD/CHF technical outlook
The USD/CHF pair has been in a strong uptrend in the past few weeks. It has jumped from the YTD low of 0.8333 to over 0.8800. The pair has remained constantly above the 50-day and 25-day Exponential Moving Averages (EMA).
It has found a strong resistance at 0.8890, its highest swing on February 13th and March 1st. The pair is also slightly below the descending trendline. Therefore, the outlook for the USD to Swiss franc is bullish but only if it moves above the resistance at 0.8890. A move above that level will open the possibility of it soaring to 0.900.
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