Swiss Franc strengthens ahead of SNB policy decision

• SNB is expected to keep its policy rate at 0% on September 24, though projections may still shift.
• The US Dollar halted its three-day rally and gave up daily gains despite lingering hawkish Federal Reserve expectations.
• Strong US manufacturing data boosts expectations for an October Fed rate hike to 69.7%.

USD/CHF loses ground after registering modest gains the previous day, trading around 0.8240 during Asian hours on Thursday. Traders await the Swiss National Bank (SNB) interest rate decision due later in the day.

SNB seen holding rates as inflation forecast set for upgrade

Economists at DBS Group Research expect the SNB to leave its policy rate unchanged at 0% at the September 24 meeting, but they still see scope for a shift in the bank’s projections. DBS notes that the SNB is “nevertheless likely to raise its near-term inflation forecast as elevated energy prices feed through into the economy amid persistent uncertainty in the Middle East,” even as Swiss growth has improved and recent easing in CHF haven pressures against the Euro and Pound reduces the urgency for a policy move.

The USD/CHF pair depreciates as the US Dollar (USD) loses its daily gains and halts its three-day winning streak despite an ongoing hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook. The hawkish momentum was highlighted by the latest Flash US S&P Global PMI data for September, which showed manufacturing expanding faster than expected at 52.0, helping offset slight pullbacks in services and composite activity.

Following US economic signals, market expectations for a 25-basis-point Fed rate hike in October surged to nearly 69.7%, up sharply from 48.7% last week. Traders are now turning their attention to the upcoming US weekly Initial Jobless Claims report, while several Fed officials have reiterated support for the recent rate increase and issued fresh warnings regarding persistent inflation risks.

Technical Analysis:

In the daily chart, USD/CHF trades at 0.8240, keeping a bullish near-term bias as price holds above both the short-term and medium-term exponential moving averages. The nine- and 50-period Exponential Moving Averages (EMAs) sit below the market and suggest an underlying uptrend structure, while the 14-day Relative Strength Index (RSI) near 63 points to firm but not extreme positive momentum. The FXS Fed Sentiment Index around 148 reinforces a supportive macro backdrop for the dollar, aligning with the constructive technical tone.

On the downside, initial support is seen at the 9-period EMA at 0.8213, with a deeper cushion coming from the 50-period EMA near 0.8121 if corrective pressures extend. With no nearby technical resistance levels from the current dataset, the pair appears biased to continue probing higher levels as long as it holds above 0.8213, though the elevated RSI hints that upside could slow if momentum approaches overbought territory.

(The technical analysis of this story was written with the help of an AI tool. Know more.)