Fed and SNB in focus

The USD/CHF pair is slowly forming a rounded bottom as investors focus on monetary policy by the Federal Reserve and the Swiss National Bank (SNB). The pair is trading at 0.9627, which is slightly above last month’s low of 0.9550.

SNB and Fed decisions

The USD/CHF current price action is mostly about the Federal Reserve and the SNB. The two banks are set to meet this month and deliver their verdicts about the economy.

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Analysts expect that the Federal Reserve will continue with its tightening policy. Officials have already said that they will hike by 0.50% in June and continue with the same pace in the next three meetings.

Most importantly, the Fed has announced that it will start reducing its balance sheet this week. The current pace of quantitative tightening will average about $47 billion every month. It will then be doubled to about $97 billion in September.

Meanwhile, the USD/CHF pair is also reacting to the upcoming decision by the SNB. The bank is expected to leave rates unchanged at the negative area where they have been for years.

However, there are rumors that the SNB will start sounding a bit hawkish considering that Switzerland is seeing high inflation. The recent data showed that the headline consumer inflation rose by 2.5%, which was the highest level in 14 years. In a recent note, Thomas Jordan said:

“We are moving into an unpleasant situation for monetary policy: inflation is already high globally and is even rising in many countries, while at the same time economic activity is weakening worldwide.”

USD/CHF forecast

The four-hour chart shows that the USD/CHF pair has been in a strong bullish trend in the past few days. The pair has managed to move from $0.9542 to the current 0.9625. The pair is now trading at the 50% Fibonacci retracement level while the MACD has moved to the neutral level. It is also attempting to move above the 50-period moving average.

Therefore, with the pair forming a rounded bottom, there is a likelihood that the pair will likely keep rising as bulls target the key resistance at 0.9800. A drop below the support at 0.9570 will invalidate the bullish trend.

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