Usdchf Drops As Snb Keeps Rates Unchanged

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Usdchf Drops As Snb Keeps Rates Unchanged

USD/CHF Drops Towards 0.87 Handle As SNB Keeps Rates Unchanged

It looks like the USD/CHF is now heading toward the 0.87 level amid increased demand for the CHF against the US Dollar.

When compared with the last week's high (0.8820), the USD/CHF has already lost 1.5% of its value. In addition, the minor gains during the Friday session are also very limited, which suggests that the trend is now bearish for the short term.

Swiss Economy Slowdowns While Interest Rates Remain High

Amid all of this chaos, the Swiss National Bank is still of the view that interest rates should be maintained. That's why the central bank kept the rates at the same level for the 2nd time in a row.

This is an interesting development, given that the Swiss economy is expected to slow down while inflation is slowly inching towards the target.

According to Thomas Jordan (Chairman of SNB), the central bank is no longer trying to prevent the Swiss Franc (CHF) from turning higher. As for the rumors about rate cuts in March 2024, the chairman added that they are more interested in selling the FX reserves rather than cutting the interest rate.

On the US side, the manufacturing PMI missed the estimates and printed a reading of 48.2. The last month's reading was 49.4, which suggests that the contraction continues in the US manufacturing sector.

Against this fundamental backdrop, it makes sense for the USD/CHF to show weakness in the short term. If we measure the recent drop in USD/CHF, it is more than 2%, which suggests that the technical readings are also now bearish.

In addition, the USD/CHF also shows a bearish crossover of the 50 and 20 SMA on the D1 chart. So, that's also a factor that will deter the USD/CHF from heading upward unless the fundamental situation changes significantly.

However, there is a possibility that the USD/CHF could resume its upward trajectory, and it depends on the early rate cuts by the SNB.

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