USD/CHF drops to levels below 0.9800, new weekly low following surprise 50bps rate hike by SNB

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  • USD/CHF came under intense selling pressure on Thursday after the SNB’s surprise rate hike.
  • The risk aversion impulse also benefited the safe haven CHF and contributed to the sharp decline.
  • The resurgence in demand for USD could prevent traders from placing aggressive bets and limiting losses.

The USD/CHF pair saw a dramatic reversal on Thursday and fell almost 200 pips from the 0.9990 area after the Swiss National Bank (SNB) announced its policy decision. The sharp decline – marking the second straight day of negative movement – took spot prices below 0.9800, a new weekly low at the start of the European session.

The SNB surprised markets with a 50 basis point rate hike, bringing the key rate to -0.25% at the end of the June monetary policy meeting. In the accompanying policy statement, the SNB left the door open for further rate hikes to counter rising inflationary pressures. This, in turn, strongly boosted the Swiss Franc and prompted aggressive selling around the USD/CHF pair.

Apart from that, the risk aversion impulse – exemplified by a generally weaker tone surrounding equity markets – further pushed safe-haven flows into the CHF and contributed to the USD/CHF pair’s slide. That said, the resurgence in demand for US dollars could prevent traders from placing aggressive bearish bets and help limit deeper losses for the major, at least for now.

Market participants are now eagerly awaiting the press conference following the meeting, where comments from SNB Governor Thomas Jordan and senior management will influence the CHF. Other than that, general market risk sentiment and USD price momentum should produce significant trading opportunities around the USD/CHF pair.

Technical levels to watch

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