The FOMC will likely raise rates by 50 basis points today.
The SNB is also expected to raise rates when they meet tomorrow at 3:30 AM ET. The SNB - like the Fed - is expected to raise rates by 50 bps to 1.00%.
Inflation remains above the target rate. Having said that, the recent inflation has been tamer than forecasts from the SNB and would likely keep hawkish commentary limited. If there is a surprise it would be for a 25 basis point hike but that is currently only a 10% chance. Nevertheless, the tamer inflation and concerns about growth, could impact the call for rate hikes down the road. In September the SNB said that "it cannot be ruled out that further increases in the SNB policy rate will be necessary to ensure price stability over the medium-term". Will they alter that statement tomorrow?
In September, the SNB raise rates by 75 basis points to 0.5%. The market expectations was for 100 basis point move.
Looking at the USDCHF daily chart, the USD decline has been the driving force for the pair over the last month and 1/2 of trading after forming a double top near 1.01471 at the beginning of November.
More recently, the price fell back into the trading range that confined the pair from June 2021 until the break higher in April 2022 between 0.9091 and 0.9382 area (see Red Box in the chart above).
That break higher in April, led to a period of volatile up-and-down price action that saw the pair bottom in August at 0.9370, reach a high in May at 1.00637, bottom again in August near the swing area at 0.9370, and peak in October and November near 1.01471 before the recent decline.
The move back below the lower swing area between 0.9353 and 0.9382 tilted the bias more to the downside for the pair. Targets on the downside would be the swing low from early April and 0.91957, the swing low from February and 0.91465, and the swing low from January at 0.9091.
Breaking below 0.9081 – the swing low from November 2021 – would be another target to get to and through if the USDCHF is to continue its run to the downside.
On the topside, getting back above 0.93537 and 0.93821 swing area would disappoint sellers looking for increased momentum on the break lower. Traders would then look toward the 0.9453 – 0.9479 followed by the 61.8% retracement of the 2022 trading range and 0.9494.
It's hard to ignore the volatile up-and-down price action that we've experienced in this currency pair for most of 2022. There has been large moves to the upside and downside that should keep traders on edge even though the pair is breaking to the downside.
A more dovish SNB could see the USDCHF move back higher and above the aforementioned 0.9382 level. If it is a momentum break, how far the pair can go to the upside is anyone's guess with close targets at 0.9453 to 0.9479 an then the broken 61.8% of the 2022 range at 0.9494. Move above that level (call it 0.9500) and there could be more upside momentum to follow.
For now however, the sellers are more in control with decent support down near 0.9081 to 0.9100.
