USD/CHF Trades With a Bullish Bias Near The Middle Of The 0.90s, And Bears Maintain Control Above The 200-Day Simple Moving Average

The USD/CHF pair sees some purchasing on dips during Friday's Asian session as it attempts to extend its breakout momentum beyond the 0.9000 psychological level. Spot prices are currently trading in the mid-0.9900s and remain within striking distance of the highest level since June 13 after the Swiss National Bank (SNB) unexpectedly paused monetary policy on Thursday.

At the conclusion of the quarterly monetary policy meeting, contrary to expectations of a 25 basis point increase, the SNB resolved to maintain its benchmark interest rate at the same level. In the accompanying statement, the SNB noted that the significant tightening of monetary policy in recent quarters is counteracting the inflationary pressure that remains. This is in addition to the recent spate of weak real economy data and sub-2% readings on headline and core inflation, which impacted heavily on the Swiss Franc (CHF) and gave the USD/CHF pair a decent boost.

In the aftermath of the Federal Reserve's (Fed) hawkish outlook, the US Dollar (USD) is seen as another factor acting as a tailwind for the USD/CHF pair as it maintains a position just below a fresh six-month high reached the previous day. The Federal Reserve decided to maintain rates at a 22-year high, between 5.25% and 5.50%, despite a warning that persistent inflation was likely to prompt at least one more rate increase in 2023. In addition, the so-called 'dot-lot' indicated that policymakers anticipate the benchmark rate to be 5.1% next year, implying only two rate cuts in 2024 as opposed to the four previously anticipated.

This reinforced market expectations that the US central bank will maintain higher interest rates for an extended period of time. In addition, the unexpected decline in US Weekly Jobless Claims sparked a new round of selling on the US fixed-income market and drove the yield on the rate-sensitive two-year US government bond to a new 17-year high. The 10-year US Treasury yield also reached its greatest level since November 2007 and continues to support the dollar. However, a generally subdued tone on the equity markets could benefit the safe-haven CHF and cap any significant intraday rise in the USD/CHF pair.

Nonetheless, the aforementioned fundamental environment appears to strongly favour bullish speculators. Moreover, the overnight break above a technically significant 200-day Simple Moving Average (SMA) validates the bullish outlook and suggests that the path of least resistance for the USD/CHF pair is higher. Now, market participants anticipate the global flash PMI readings, which may affect the broader risk sentiment and provide impetus to the main. Meanwhile, spot prices are on pace to finish in the black for the tenth consecutive week.