The USD/CHF exchange rate moved sideways on Monday morning even as the Swiss banking industry came under intense pressure. It was trading at 0.9262, which was a few points below last Friday’s high of 0.9340. The next key forex news will be on the Fed and SNB interest rate decisions.
Credit Suisse crisis averted?
Switzerland, a country known for its banking sector, is in a crisis caused by the collapse of Credit Suisse. At its peak, Credit Suisse had over $1 trillion in assets and a market cap of over $50 billion. During the weekend, the Swiss National Bank and other regulators brokered a deal that will see the company be bought by UBS Group in a $3.25 billion deal. We wrote about the deal here.
That deal, if completed, will have significant implications to investors and bondholders. For one, the company’s market capitalization was over $7 billion on Friday. This means that shareholders have lost over 50% of their value. Bondholders, on the other hand, have lost over $11 billion.
Therefore, the question is whether the collapse of Credit Suisse will have an impact on the Swiss economy and the actions of the Swiss National Bank (SNB). Analysts believe that the impact to the economy will be minimal even though Credit Suisse will shed additional jobs in the near term.
Another risk is that wealthy foreigners will now be afraid of using Swiss banks to store their wealth. This is highly unlikely since Switzerland still has some of the safest banks like UBS and Julius Baer, which I wrote about here.
The only major impact is that the SNB could decide to delay further interest rate hikes in the near term. The bank caught people by surprise last year when it started to aggressively raise rates. It has now delivered four hikes and hinted that more increases will come. The SNB will deliver its decision on Thursday.
The next key catalyst for the USD/CHF price will be the upcoming Federal Reserve decision scheduled for Wednesday.
USD/CHF forecast
USD/CHF chart by TradingView
The 4H chart shows that the USD to CHF exchange rate has been in a tight range in the past few days. During this period, the pair has formed what looks like a bullish pennant pattern, which is usually a bullish sign. It is also consolidating at the 25-period and 50-period exponential moving averages (EMA) while the Relative Strength Index (RSI) has moved to the neutral point.
Therefore, the pair will likely have a bullish breakout in the coming days. If this happens, the next key level to watch will be at 0.9350.
Source: https://invezz.com/news/2023/03/20/usd-chf-forms-bullish-pennant-ahead-of-fed-and-snb-decision/