USD/CHF Prediction amid Fed’s Impending Quantitative Tightening

  • USD/CHF saw sideways action following the latest Fed Reserve minutes.
  • The minutes revealed that the bank would begin quantitative tightening.
  • The divergence between SNB and Fed has widened.

USD/CHF went sideways following the latest Switzerland unemployment rate and hawkish stance by the US Fed Reserve. For now, the pair trades at 0.9326, slightly under the 29 March peak point. It had gained approximately 1.39% from last week’s lowest mark.

SNB and Fed Divergence Widens

USD/CHF had its price stable as the recent FOMC minutes indicated the divergence between SNB (Swiss National Bank) and Fed widened. Meanwhile, Federal Reserve revealed plans to extend the tightening process via six rate increases in 2022. Some of these hikes will be around 0.50%.

Also, the minutes suggested that the bank would begin QT (quantitative). QT is an approach in which the bank starts reducing its balance sheet size. It’s the opposite of the QE (quantitative easing) program. The QT will mean the bank selling assets worth about $95 billion every month. During QE, it purchased assets worth around $120 billion every month.

The past couple of days had several Federal Reserve officials, including Mary Daly, Raphael Bostic, and Lael Brainard, admitting supporting further tightening. On the other side, SNB hinted at keeping interest rates low, targeting Swiss franc devaluation. Moreover, the bank spent billions on foreign exchange interventions. Swiss National Bank trust a feeble frank is essential in supporting its currency.

Meanwhile, the USD/CHF responded slightly to the latest unemployment rate in Swiss. Data showed that the unemployment rate dropped to 2.2% from 2.3% (on a seasonally-attuned basis). That means Switzerland boasts one of the least jobless rates worldwide.

USD/CHF Prediction

The USD/CHF climbed higher towards 0.9349, the highest zone since 29 March. The 25- and 50-period made a bullish cross. Moreover, the pair stayed slightly beneath the descending trend line. Also, it appears to form an inverted head-shoulder setup as the Relative Strength index surged. The asset might witness a bullish breakout within the upcoming days. Such developments will see USD/CHF heading to the vital resistance zone at 0.9400.

You can leave your comments in the reply area below.

Leave a Comment