USD/CHF forecast after the SNB and Fed rate hikes

The USD/CHF exchange rate has been in a freefall in the past few weeks as investors focused on the actions by the Federal Reserve and the Swiss National Bank (SNB). It crashed to a low of 0.9213, which was the lowest level since April this year. It has collapsed by almost 9% from the highest level in November.

Fed and SNB last decisions

The Federal Reserve concluded its final monetary policy meeting on Wednesday and did what most analysts were expecting. It decided to hike interest rates by 0.50% to 4.50%. It has hiked by 450 basis points this year, making it the most hawkish year in a long time.

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The only change was that the Fed was much hawkish than economists expected. It hinted that it will continue hiking interest rates in 2023. Precisely, as we wrote here, it hinted that it has another 75 basis point rate hikes to go.

Still, analysts believe that the bank wanted to calm the market since the US dollar index and bond yields have been in a freefall recently.

The USD/CHF price also reacted to the latest rate decision by the SNB. In a statement, the bank decided to hike interest rates by another 0.50% to 1%, the highest level in decades. It attributed this decision to the need to counter increased inflationary pressure. The bank hinted that it will need to deliver more hikes in 2023. It said:

“It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term. To provide appropriate monetary conditions, the SNB is also willing to be active in the foreign exchange market as necessary.”

Swiss inflation has moderated slightly and is currently at 3.0%, which is above the SNB target of 2.0%. It assume that inflation will slow to about 1% in 2023.

USD/CHF forecast

The daily chart shows that the USD to CHF price has been in a freefall in the past few months. In this period, the pair has crashed below the important support level at 0.9374, the lowest level on August 11. It has also declined below the 25-day and 50-day moving averages.

The USD/CHF price has also seen its Relative Strength Index (RSI) drop close to the oversold level. Therefore, the path of the least resistance will be lower. If this happens, it will likely drop to the support at 0.9000.